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Paolino v. Ferreira

Supreme Court of Rhode Island

February 16, 2017

Louis Paolino et al.
v.
Joseph Ferreira et al.

         Providence County Superior Court (PC 06-5973) Associate Justice Patricia A. Hurst

          For Plaintiffs: Brian A. Wagner, Esq. Ronald L. Bonin, Esq.

          For Defendants: Robert Clark Corrente, Esq.

          Present: Suttell, C.J., Goldberg, Flaherty, Robinson, and Indeglia, JJ.

          OPINION

          FRANCIS X. FLAHERTY, ASSOCIATE JUSTICE

         This dispute has generated two separate appeals. The first is the appeal of the prevailing plaintiffs, Louis Paolino and Marie Issa (collectively plaintiffs), from adverse rulings made by the trial justice in favor of the defendants, Joseph I. Ferreira, LKQ Corporation, the Joseph I. Ferreira Trust, and J.F. Realty, LLC (collectively defendants). The second is the appeal of Attorney Brian Wagner, who appeals sanctions that were imposed against him by the trial justice.

         In the first appeal, plaintiffs contend that the trial justice erred when she (1) failed to order injunctive relief sought by plaintiffs; (2) refused to allow plaintiffs to amend their pleadings to conform to the trial evidence regarding a punitive damages claim against defendant, J.F. Realty, LLC; (3) did not permit plaintiffs' expert to testify that storm water runoff from defendants' property caused the seepage of oil along a man-made ditch located on plaintiffs' property; and (4) failed to grant a new trial based upon plaintiffs' newly discovered evidence. After careful consideration of the record, and for the reasons set forth in this opinion, we conclude that the trial justice impermissibly limited the testimony of plaintiffs' expert. Consequently, we affirm in part, and vacate in part, the judgment of the Superior Court and remand for a new trial on all issues with the exception of the prayer for injunctive relief.

         I Background

         This dispute arises from the use of a thirty-five acre parcel of land in Cumberland. Since the 1940s, the property has hosted, from time to time, a pig farm, a gravel pit, a dump, and a salvage yard for motor vehicles.

         In October 1983, Joseph Ferreira purchased approximately thirty acres of the property for use as an auto salvage yard.[1] Advanced Auto Recycling (AAR), which was an auto salvage company that Ferreira owned, began to operate on the property about five to six months after Ferreira purchased it. The Ferreira property included a stream and two large ponds, one of them man-made, that bordered the land that Paolino would later purchase.

         When Ferreira purchased the property, it was vacant with the exception of a small trailer, and the property was littered with considerable debris, tires, and scrap metal. Despite the condition of the land, Ferreira did not have any environmental firms inspect the property before he purchased it. He did, however, clean it up right after acquiring it by removing the metal and tires from the property; indeed, he claimed that he removed thousands of tires. Ferreira testified that it took him three to five years to finally get the property to look clean.

         Soon after Ferreira took ownership, he began to fill in wetlands. He said that, as a result of those alterations, the larger pond was filling with water at a rapid rate; therefore, he needed to enlarge the stream.

         Those alterations did not escape notice. In November 1983, the Rhode Island Department of Environmental Management (DEM) inspected Ferreira's property in response to a complaint that he was filling a pond. DEM sent Ferreira a notice of violation, ordering him to stop filling in the pond. He did, however, continue to enlarge the stream. At a later date, a DEM employee spoke to Ferreira about alternative ways to alleviate the problems that he had observed on the property. Eventually, Ferreira entered into a consent agreement with DEM that required him to employ erosion controls and to address the ongoing environmental violations.

         Soon after he purchased the property, Ferreira constructed a building that was used for dismantling cars and as an office. The building was approximately two hundred feet away from the stream. When construction of the building was complete, he began to bring vehicles onto the property. In 1991 he constructed a second building along the border of Paolino's property. At trial, Ferreira testified that he did not conduct a survey before he built that structure, but that he was told it would be seven to ten feet away from the property line. An addition to the building was completed in 2001; again, no survey was performed.[2] By 2001, the Joseph I. Ferreira Trust (the trust) owned the property. Ferreira was the sole trustee of the trust.

         By October 2005, Ferreira, as trustee of the trust, had sold his business to LKQ Corporation (LKQ), a national auto-recycling company. The trust then conveyed the land to J.F. Realty, LLC (J.F. Realty), of which Ferreira was the sole member. That entity then leased the property to LKQ. In response to another DEM inspection in 2005, requiring AAR to install temporary drainage controls, a plan was submitted and approved. Pursuant to that plan, Ferreira hired Commonwealth Engineers to design and install a storm water pollution prevention plan on his property, which was completed by 2008.

         AAR Operations

         During his testimony at trial, Ferreira described the activities conducted on the AAR site, testifying that automotive fluids would be drained and captured inside the building before a car was placed in the yard. The fluids would be deposited into barrels and recycled. Ferreira testified that oil was stored outside next to the addition to the first building, which was about 100 to 150 feet away from Paolino's property. During his testimony, Ferreira further acknowledged that he had noticed turbid water running off the site even after the installation of the storm water pollution prevention plan, and that he had occasionally seen oil drip from engines on his property. He also testified that he never deposited any scraps of metal, auto parts, tires, or fluids onto Paolino's property or in any of the ponds.

         Paolino Purchases

         In December 1985 LM Nursing Services Inc. (LM Nursing), Paolino's company, purchased six acres on Curran Road that abutted Ferreira's property. In 1987 Paolino received a letter from DEM about the potential release of contaminants in the area, notifying him that his land was on the CERCLIS[3] list. Paolino promptly hired Environmental Resource Associates, Inc. (ERA), a company specializing in investigations of environmental contamination, to conduct tests on his land. After ERA's site assessment was complete, LM Nursing conveyed the property to Paolino and his wife, Marie Issa. Additionally, after all the testing was completed, Paolino's attorney wrote to the EPA requesting that his property be removed from the CERCLIS list because no contamination had been revealed by ERA's testing. As a result, the Paolino property was removed from the CERCLIS list. Paolino claimed that he did not have any further problems with contamination on his property throughout the 1990s. Indeed, he said that the Division of Air and Hazardous Materials of DEM sent a letter indicating that the stream was sampled two times, once in 1987 and once in 1990, and that neither sample found contamination.

         Despite Paolino's claims and the DEM letter, contaminants were found in the soil after a potential buyer retained a company called GZA GeoEnvironmental, Inc. (GZA) to evaluate the land. Paolino received a letter of responsibility from DEM asking him to submit a site investigation report as well as naming him as the person "responsible for properly investigating and, if necessary, remediating hazardous materials at the site." GZA did some remediation, but that process was never completed. In December 2004 DEM sent Paolino a letter of noncompliance representing that he, as the owner of the property, was responsible for the investigation and remediation of hazardous material at the site.

         On November 16, 2006, plaintiffs filed an action in the Superior Court, asserting that defendants had caused contaminants to flow onto their property.[4] Thereafter, plaintiffs filed a first amended complaint to add a claim for continuing trespass. Subsequently, plaintiffs filed a second amended complaint that contained thirty-five counts, including the addition of claims for public and private nuisance and federal and state environmental violations. The second amended complaint added two new defendants: Joseph I. Ferreira Trust and J.F. Realty, LLC. Eventually, an eleven day trial was held before a jury.[5] After judgment entered on behalf of plaintiffs, plaintiffs, nonetheless, timely appealed.

         II Issues on Appeal

         Before this Court, Paolino and Issa argue that the trial justice erred by failing to order injunctive relief against defendants because of a continuing trespass. The plaintiffs further argue that the trial justice erred when she precluded plaintiffs' expert from offering his opinion that storm water runoff from defendants' property was the source of the oil located along the man-made ditch on plaintiffs' property. The plaintiffs also maintain that the trial justice erred when she denied their motion to amend their complaint to conform to the evidence and when she denied their motion for a new trial based on the discovery of new evidence.

         Because we are of the opinion that the trial justice erred when she restricted the expert's trial testimony, and because that is dispositive of this appeal, we need not address the other issues raised in the appeal, with the exception of the denial of injunctive relief.

         III Failure to Order Injunctive Relief

         A Facts and Travel

         At the conclusion of trial testimony, a jury verdict summary sheet was submitted to the jury. The jury found that there had been a continuing trespass on Paolino's property and it awarded plaintiffs nominal damages of $1, 400. The continuing trespasses identified were: a corner of defendants' metal building, the headwall and riprap for defendants' storm water remediation system, and the discharge flowing from defendants' property onto plaintiffs' property. Nearly two years after the jury returned a verdict, plaintiffs filed a motion for entry of final judgment. During the hearing on their motion, plaintiffs claimed they were entitled to injunctive relief to remove the continuing trespasses, the traditional remedy in such cases. Subsequently, an evidentiary hearing was held before the trial justice on plaintiffs' request for injunctive relief.

         During the hearing, Paolino identified three photographs depicting the pre-existing condition of the location where the storm water pollution prevention plan was later installed. The pictures did not include the storm water pollution prevention plan discharge pipes.

         The defendants' counsel then called Eugene Jeffers, the director of public works for the Town of Cumberland, as a witness. He testified that, since the installation of the storm water treatment system at Curran Road, the town had not experienced any problems with flooding of the road in that area. He also testified that, if the system were to be eliminated or changed, the town would want to review what was going to be done. Eric Beck, a supervisor for the Rhode Island Pollutant Discharge Elimination System (RIPDES) program in the office of water resources at DEM, testified that maintaining the riprap would not require a permit from DEM, but that any other activities that would have the potential to either alter the stream, or any construction, would require a permit from DEM. When asked about removing the riprap, he deferred to DEM about whether a permit was required or not. When asked whether there had been any flooding problems in the area as the system was currently constructed, he answered in the negative. Richard Bessette, a general contractor, testified that the estimated price of removing the building encroachment on Paolino's property was $38, 204.50. He also testified that the estimated cost of removing the portion of the headwall encroaching on Paolino's property was $18, 000. Bessette further testified that removing portions of the storm water remediation system away from Paolino's property would cost either $52, 468 or $65, 795, based on estimates obtained from two separate companies.

         Later that afternoon, the trial justice issued a bench decision, granting plaintiffs' request for injunctive relief in part and denying it in part. She ordered only that the encroachment of defendants' metal building be removed. With respect to the encroachments of the headwall, riprap, and discharge of the storm water, the trial justice found that there was no bad faith on the part of defendants. After balancing the equities, she concluded that the remaining encroachments were de minimis and that their removal would not benefit plaintiffs, but rather would disproportionately harm defendants.

         The trial justice stated that the general rule for a continuing trespass is injunctive relief, citing Santilli v. Morelli, 102 R.I. 333, 230 A.2d 860 (1967). She noted, however, that there are exceptions to mandatory injunctive relief, such as when the impact to a defendant is disproportionate to the benefit to the plaintiff, that allow for a balancing of the equities. She also observed that where an encroachment is intentional, the court may refuse to balance the equities, citing Renaissance Development Corp. v. Universal Properties Group, Inc., 821 A.2d 233 (R.I. 2003) (Renaissance).

         The trial justice found that defendants did not act in bad faith or recklessly. She credited Ferreira's testimony that he had believed the streambed to be on his property. Furthermore, she noted that Ferreira obtained a building permit to construct a metal storage building close to the stream, evidencing that his understanding of the property boundary was genuine and that he respected what he genuinely believed the boundary to be. She also noted that the survey conducted in 2003 by Cournoyer Enterprises (the 2003 Cournoyer survey) depicted the building as butting right up to the property line; it did not depict any encroachments. The trial justice found Robert Yabroudy, Ferreira's controller, who testified that he thought the building was right on the property line, to be credible. Additionally, the trial justice noted that plaintiffs' 2009 survey, conducted by Robert Perruzzi, failed to pick up any boundary problem other than the building encroachment, which the survey identified as 0.86 feet over the property line. She stated that "[o]bviously, it was easy to make a mistake about the precise location of the property boundary, " as even Perruzzi seemed to believe that the headwall and riprap were on defendants' property. Moreover, the trial justice read little into the fact that defendants failed to disclose the 2003 Cournoyer survey to DEM because it was not news to either party that the storm water remediation system lay close to the property boundary. The trial justice concluded that the boundary encroachments were not caused by bad faith or recklessness, and she continued to balance the equities.

         With regard to the encroachment of the headwall and riprap, the trial justice described it as de minimis. She indicated that the end of the headwall for the storm water remediation system extended only about twelve inches over the property line. She said it was clear from the evidence that there was some benefit to the structures as a containment system and that removing the headwall and riprap could complicate the situation on Curran Road. Therefore, she understood the reluctance of the town to allow tampering with the existing structures. Furthermore, she reasoned that it would cost $18, 000 to remove the riprap and that there would ultimately be no benefit to plaintiffs if the riprap and headwall were removed.

         With respect to the discharge from the storm water remediation system, the trial justice said that the evidence was that redesigning the system and rerouting the discharge to bypass plaintiffs' property would not "materially benefit" anyone. She remarked that the discharge from the storm water remediation system followed the natural drainage pattern and that, given the lay of the land, surface water runoff from defendants' property would gravitate to plaintiffs' property even in the absence of the storm water remediation system. She reasoned that the evidence indicated it would cost up to $60, 000 to redirect the discharge and that the cost of redesigning and modifying the storm water remediation system outweighed the value of plaintiffs' property. She concluded that the financial burden to defendants would be "significant and substantial, " especially because the tasks and "associated costs of redesigning and rebuilding * * * would be vastly disproportionate to any benefit [to plaintiffs] * * * if the discharge from that system was to be redirected and the encroaching structures removed."

         Regarding the metal building, the trial justice granted plaintiffs' request for injunctive relief. She reasoned that such an encroachment invites more human activity onto the area of plaintiffs' property because people would be retrieving automobile parts that were stored in the structure. She ordered that the encroachment of the metal building be removed and the building scaled back.

         B Standard of Review

         "A judgment in a nonjury case will be reversed on appeal when it can be shown that the trial justice misapplied the law, misconceived or overlooked material evidence[, ] or made factual findings that were clearly wrong." Rose Nulman Park Foundation ex rel. Nulman v. Four Twenty Corp., 93 A.3d 25, 28 (R.I. 2014) (Rose Nulman) (quoting Lamarque v. Centreville Savings Bank, 22 A.3d 1136, 1139-40 (R.I. 2011)). Likewise, "a decision to grant or to deny injunctive relief is discretionary in nature, and such a decision will not be disturbed on appeal absent a showing of abuse of discretion or error of law." Id. (quoting North End Realty, LLC v. Mattos, 25 A.3d 527, 530 (R.I. 2011)).

         C Analysis

         On appeal, plaintiffs argue that the trial justice erred when she chose to balance the equities in deciding to deny their request for injunctive relief. Rather, plaintiffs assert that the trial justice should have granted that relief because defendants acted in bad faith and/or recklessly in placing the encroachments on plaintiffs' property, and, therefore, it was inappropriate to balance the equities.

         When real property is involved, "[i]t is a bedrock principle of our property jurisprudence that land is not fungible; and, accordingly, equitable remedies are normally used when it comes to injuries and intrusions to it." Rose Nulman, 93 A.3d at 29. Furthermore, this Court has "generally held that the appropriate remedy for a continuing trespass is injunctive relief." Id. We have, however, also recognized that "this general rule is not absolute and that, accordingly, in exceptional cases, a court may, in its discretion, decline to follow it where the injunctive relief would operate oppressively and inequitably." Id. Examples of "these exceptional circumstances include, but are not limited to, acquiescence, laches, or a de minimis trespass." Id.

         In addition, "we have also held that courts may withhold injunctive relief after balancing the equities or, put another way, considering the relative hardships to the parties." Rose Nulman, 93 A.3d at 30. Although a trial justice may balance the equities, he or she "is not required to balance the equities before granting injunctive relief * * * [as] '[t]he doctrine of balancing the equities is applied in cases when the enforcement of a restriction will disproportionately harm the defendant with little benefit to the plaintiff.'" Id. (quoting Cullen v. Tarini, 15 A.3d 968, 982 (R.I. 2011)). Rather, "this Court has emphasized, '[t]he issuance and measure of injunctive relief rest in the sound discretion of the trial justice.'" Id. (quoting Cullen, 15 A.3d at 981).

         The plaintiffs cite Renaissance, 821 A.2d at 239, to argue that the trial justice's balancing of the equities was not appropriate here because "the hardship to [the] defendants was self-inflicted." In Renaissance, this Court concluded that a balancing of the equities was not supportable because "defendants knowingly and deliberately encroached on [the plaintiff's] property, and did so even after the encroachment was prohibited by [the plaintiff]." Id. Furthermore, this Court reasoned that, even if the balancing of the equities had been appropriate under the circumstances, the encroachment was more than de minimis. Id. Conversely, the trial justice here found that defendants did not act in bad faith or recklessly. Rather, she credited Ferreira's testimony that he believed that the streambed was on his property. The trial justice also said that the 2003 Cournoyer survey did not reveal any encroachments and the 2009 survey conducted by Paolino noted only the building encroachment. Additionally, the trial justice observed that "[o]bviously, it was easy to make a mistake about the precise location of the property boundary" as Perruzzi himself seemed to believe that the headwall and riprap were on defendants' property. Lastly, the trial justice read little into the fact that defendants failed to disclose the 2003 Cournoyer survey to DEM because it was acknowledged that the storm water remediation system lay close to the property boundary. Because the trial justice found that defendants did not "knowingly and deliberately encroach[]" upon plaintiffs' property, but actually respected what they genuinely believed the property line to be, it is our opinion that the trial justice did not err when she determined that defendants did not act in bad faith or recklessly, and concomitantly she did not err when she balanced the equities to determine whether to grant or deny injunctive relief.

         Furthermore, it is our opinion that this case falls within the exceptional circumstances that this Court has said justifies the use of a trial justice's discretion to decline to order mandatory injunctive relief. In Santilli, 102 R.I. at 335, 230 A.2d at 862, the defendants' wall extended eighteen inches into the plaintiffs' property, constituting a continuing trespass. The defendants argued that the encroachment of the wall did not "substantially interfere with [the] plaintiffs' use of their land, that such relief is of no real benefit to [the] plaintiffs, and that it would cause considerable inconvenience and pecuniary obligation to [the] defendants." Id. at 337, 230 A.2d at 863. Although this Court in Santilli declined to apply the exception to the general rule of granting injunctive relief for continuing trespasses, we did, however, acknowledge that "the existence of such circumstances may in exceptional cases move the court to withhold the coercive relief contemplated by the general rule." Id. at 338, 230 A.2d at 863; see also Bentley v. Root, 19 R.I. 205, 208, 32 A. 918, 919 (1895) ("Assuming all the obstruction which the complainant claims, still, as it does not interfere with his use of the way, and relief in equity would be of no real benefit to him, but a cause of great trouble to the respondents, * * * we may properly leave him to his remedy at law."). We are satisfied that this case involves such exceptional circumstances, warranting a balancing of the equities.

         It should not be overlooked that the trial justice granted plaintiffs' request for injunctive relief with respect to defendants' metal building, even though the structure encroached onto plaintiffs' property by a mere five inches. She reasoned that such an encroachment invites continuous human activity onto plaintiffs' property because the metal building was used in connection with a business.

         In Renaissance, 821 A.2d at 239, this Court concluded that the encroachment was more than de minimis. This Court reasoned that "[the plaintiff's] access to the back portion of its lot was restricted, the amount of land involved was approximately 250 square feet, and the result of the encroachment was the economic enrichment of [the] defendants at the expense of [the plaintiff]." Id. Similarly, in Rose Nulman, 93 A.3d at 32, this Court stated "that an encroachment of some 13, 000 square feet is not a minimal one * * * [and] is not small enough that a balancing of the equities makes the hardship to [the] defendants outweigh the harm to [the] plaintiffs." Here, unlike in Renaissance and Rose Nulman, the trial justice described the twelve-inch ...


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