63 N.Y.2d 87 (1984)

When the State incurs expenses to clean up an oil spill, it can bring a common-law indemnity action against the responsible party, which is governed by a six-year statute of limitations that begins to run with each expenditure made by the State.

Summary

This case concerns the statute of limitations applicable to New York State’s action to recover costs for cleaning up an oil spill from the responsible party, Brundige Oil Corp. The State sought to recover cleanup costs from Brundige Oil after a leak from Brundige’s storage tanks contaminated a local water well. The Court of Appeals held that the State’s claim was a common-law indemnity action governed by a six-year statute of limitations, which accrues upon each expenditure made by the State for cleanup. Thus, the State’s action, filed within six years of the expenditures, was timely.

Facts

Brundige Oil Company owned oil storage tanks in Montgomery County. In September 1978, a leak was discovered in the tanks, contaminating the water well of a nearby restaurant. The State of New York undertook cleanup and containment efforts starting in late 1979 and ultimately spent nearly $10,000. The State then sued Brundige Oil in August 1982 to recover these costs.

Procedural History

The Supreme Court denied Brundige Oil’s motion to dismiss, finding a three-year statute of limitations applied but that the action accrued upon the State’s payments. However, it deemed the suit untimely as to payments made more than three years before the action began. The Appellate Division modified, holding the statute began to run upon the State’s final payment or discovery of the responsible party, whichever was later. The Court of Appeals affirmed on different grounds, finding a six-year statute of limitations applied and the action was timely.

Issue(s)

1. Whether the State’s action to recover oil spill cleanup costs from the responsible party is governed by a three-year statute of limitations for liabilities imposed by statute or a six-year statute of limitations for contractual obligations.
2. When does the statute of limitations accrue for the State’s action to recover oil spill cleanup costs?

Holding

1. No, because the action is based on common-law indemnity, which is governed by the six-year statute of limitations for contractual obligations or liabilities.
2. The statute of limitations accrues when the State suffers a loss, meaning when the State makes expenditures for the cleanup.

Court’s Reasoning

The Court reasoned that the State’s action was for common-law indemnity because the State discharged a duty (oil spill cleanup) that was primarily the responsibility of Brundige Oil, the party that caused the spill. The court stated, “a person who, in whole or in part, has discharged a duty which is owed by him but which as between himself and another should have been discharged by the other, is entitled to indemnity”. Indemnity actions are based on the prevention of unjust enrichment, where “a contract to reimburse or indemnify is implied by law.” Thus, the six-year statute of limitations for contractual obligations applies. The Court rejected the argument that the three-year statute for liabilities imposed by statute applied, noting that liability for damage to land caused by an oil spill exists independently of the Oil Spill Prevention, Control, and Compensation Act. The court further held that the statute of limitations accrues when the party seeking indemnity suffers a loss. In this case, the State suffered a loss each time it expended funds for the cleanup. The Court declined to create a new accrual date, stating “no compelling reason is presented in this case to diverge from the traditional view that an action for indemnity accrues when any ‘loss is suffered’ by the party seeking indemnity.” Because the suit was commenced within six years of the State’s expenditures, the action was timely.