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B&G Diversified Inc - Order, November 11, 1993

Order, November 11, 1993

STATE OF NEW YORK : DEPARTMENT OF ENVIRONMENTAL CONSERVATION

In the Matter of

Alleged Violations of Article 17 of the Environmental Conservation Law

- by -

B & G DIVERSIFIED, INC.

Respondent

ORDER

Case No. R-6-1373-93-10

Utica, Oneida County

WHEREAS:

  1. This matter was previously decided by me in an order dated June 16, 1992. My determination was appealed by the Respondent, B & G Diversified, Inc., in a proceeding pursuant to CPLR Article 78. The matter was remanded here by Judge Tenney of the State Supreme Court, Oneida County, in a decision dated August 30, 1993. The matter was remanded so the Respondent could apply for opening the default judgment which was previously taken.
  2. Upon remand, the matter was assigned to Administrative Law Judge ("ALJ") Edward Buhrmaster. He has prepared a report which is attached hereto and made a part of this Order.
  3. Upon review of the ALJ's report and the prior record in this matter, I hereby accept and adopt the conclusions and recommendation of the ALJ. While the Department Staff secured proper service of its motion for summary order, the Respondent has shown good cause to open the default based on its officers not having actual notice of the pending motion.

NOW, THEREFORE, have considered this matter, it is ORDERED that:

  1. The default in this matter is opened, but only on the civil penalty issue.
  2. The record on this issue shall be developed in accordance with the hearing procedure suggested in the ALJ's report.
  3. With the exception of its provisions assessing a $25,300 civil penalty, my prior order of June 16, 1992, remains in full force and effect.

For the New York State Department
of Environmental Conservation

_____________/s/_____________
By: THOMAS C. JORLING, COMMISSIONER

Dated: November 10, 1993
Albany, New York

STATE OF NEW YORK
DEPARTMENT OF ENVIRONMENTAL CONSERVATION

50 Wolf Road
Albany, New York 12233-1550

In the Matter

- of -

Alleged Violations of Article 17 of the Environmental Conservation Law

by

B & G DIVERSIFIED, INC.

Utica, Oneida County

Respondent

Case No. R-6-1373-93-10

HEARING REPORT

- by -

_____________/s/_____________
Edward Buhrmaster
Administrative Law Judge

BACKGROUND

This matter was remanded to the New York State Department of Environmental Conservation ("the Department" or "DEC") by Judge Tenney of the State Supreme Court, Oneida County. (A copy of the decision of Judge Tenney is attached to this report as Appendix "A".)

The matter was remanded for the Respondent, B & G Diversified, Inc., to apply for opening a default judgment which was taken in a prior matter. That matter (R-6-1115-91-05) was decided by an order of the Commissioner, dated June 16, 1992. (A copy of the Commissioner's order is attached to this report as Appendix "B".)

The prior matter was initiated by a motion for summary order, dated April 21, 1992, which was prepared by DEC Staff. In the motion Staff sought a combined civil penalty of Twenty Five Thousand Three Hundred Dollars ($25,300) for two alleged violations related to the Respondent's ownership of a now-defunct gas station in Utica, New York.

These violations were as follows:

- - Failure to register a petroleum storage facility with DEC prior to December 26, 1986, in violation of 6 NYCRR 612.2(a)(1); and

- - Failure to perform tightness testing on two petroleum bulk storage tanks, each of unknown age, prior to December 27, 1987, in violation of 6 NYCRR 613.5(a)(1)(ii).

The Respondent did not answer the motion for summary order and was therefore held in default. The Administrative Law Judge ("ALJ") then assigned to this matter, Francis W. Serbent, recommended that the motion be granted. This recommendation was adopted in the Commissioner's order, which assessed the penalty requested by DEC Staff and directed either (1) that the tanks be closed or (2) that tightness tests be performed, with any leaks reported promptly to the Department.

The Respondent commenced a proceeding pursuant to Article 78 of the Civil Practice Law and Rules ("CPLR") to set aside the Commissioner's order on the grounds that it was never properly notified of the motion for summary order and that the assessed civil penalty is excessive and disproportionate to the alleged violations.

In his decision, Judge Tenney found that the Respondent's application to set aside the Commissioner's order must be denied and the proceedings transferred back to DEC since the Respondent "must first make an application before the DEC to open the default on the grounds that it did not receive notice of the summary proceedings brought against it by the DEC." On the premise that the Respondent had not exhausted its administrative remedies, Judge Tenney said that until the issue of the Respondent's default is addressed by the DEC, he could not entertain the Respondent's application.

PROCEEDINGS

After the court remand this matter was assigned to me for the purpose of considering whether to open (or vacate) the Respondent's default. On October 14 and again on October 21, 1993, I had conference calls with counsel for the parties. Department Staff was represented by Judy Drabicki, Region 6 Attorney, Watertown. The Respondent was represented by Gustave J. DeTraglia, Jr., Esq., 1425 Genesee Street, Utica.

This report is based on statements made by party counsel during the telephone conferences and a letter of Mr. DeTraglia, dated October 14, 1993, which summarizes the Respondent's arguments. In addition, I have considered the prior hearing record, the Respondent's court papers, and the decision of Judge Tenney.

APPLICABLE LAW

The Department's enforcement hearing regulations do not directly address applications to open defaults after issuance of a Commissioner's order. However, some guidance is provided by 6 NYCRR 622.12(b)(4), which provides that a hearing officer "may open a default or relieve any party of the consequences of any default upon good cause shown."

This section covers matters not yet decided by a Commissioner's order, but the standard for opening a default - - "good cause shown" - - is equally appropriate here. Since the default in this matter has been ratified by the Commissioner, it would seem that only he (and not the ALJ) can decide whether the default shall be opened. That is how I am considering the Respondent's application: with a recommendation made in this report, and reserving the final decision to the Commissioner.

POSITIONS OF THE PARTIES

Department Staff

The Department Staff states that it provided the Respondent adequate notice of its motion for summary order because its papers were sent to the Respondent's place of business by certified mail and were signed for by one of its employees, as evidenced by the domestic return receipt (or "green card") which was returned to the Department. Therefore, Staff opposes vacating the default.

Respondent

The Respondent acknowledges that the motion papers were sent by certified mail, received at its place of business, and signed for by one of its clerks. But the Respondent also says the clerk then placed the papers in a drawer and never brought them to the attention of any corporate officer. The Respondent claims it had no actual notice of the DEC proceeding until it received the Commissioner's order.

According to the Respondent, service of the motion papers was not proper since they were not received by a properly designated official of the corporation. Even if service was proper, the Respondent asserts there is still "good cause" to open the default given its lack of actual notice of the administrative proceeding.

FINDINGS OF FACT

  1. On April 22, 1992, the Department's Region 6 Staff sent its motion for summary order by certified mail, return receipt requested, to Frank Bruzzese, President, B & G Diversified, Inc., 535 Oriskany Street West, Utica, New York, 13502.
  2. The Department's motion papers were delivered to that address on April 24, 1992, and signed for by one M. Wall, a clerk employed by the Respondent.
  3. This clerk then put the papers in a drawer without bringing them to the attention of any corporate officer.
  4. Officers of the Respondent first became aware of the Department's motion after it was decided, upon receipt of the Commissioner's order.

DISCUSSION

Evaluation of Hearing Record

The above findings of fact are based upon the Department's affidavit of service of the motion papers, the "green card" it received in response to its mailing, and the October 14, 1993 letter of Respondent's counsel, Mr. De Traglia, which incorporates the Respondent's court papers.

During our second conference call DEC counsel, Ms. Drabicki, questioned the Respondent's accounting of events, noting that the Commissioner's order, which was received by corporate officials, was also sent by certified mail and appears also to have been signed for by M. Wall, based on the "green card" returned to DEC's Office of Hearings. Staff infers from the clerk having passed on the order that she also passed on the motion papers, despite the Respondent's denial of actual notice.

Staff's argument has been considered but is hereby rejected based on the Respondent's description of its clerk as having been inattentive to her duties. Assuming this was true (and there is no basis to conclude otherwise) normal presumptions of regularity in the performance of one's duties would not apply. There would be no expectation of normal or consistent business practice.

In the absence of other bases for rejecting Respondent's account, the passing on of other certified mail does not, in itself, discredit Respondent's claims that it lacked actual notice of the pending DEC motion. These claims are accepted as true for the purpose of the Respondent's application, which is to open the default.

Adequacy of Service

The Respondent contends that it did not receive proper notice of the motion for summary order because the papers were not "received" by any officer or director of the corporation, or any cashier, managing agent, general agent, or other agent authorized by appointment or by law to receive service.

This contention is rejected as service was proper, according to the Department's own enforcement hearing regulations. These regulations provide that service of a motion for summary order may be by certified mail, in which case service is complete when the motion is received [6 NYCRR 622.3(c)].

As noted in the findings of fact, the Department's motion papers were sent by certified mail and received by an employee of the Respondent at the Respondent's place of business. There is no requirement that the papers be signed for by a corporate officer or director or by any other agent authorized to receive service.

The language cited by the Respondent relates to the CPLR's provision for personal service upon a corporation, which is made by delivering the summons "to an officer, director, managing or general agent, or cashier or assistant cashier or to any other agent authorized by appointment or by law to receive service" [CPLR 311(1)]. This provision does not address service by certified mail. Such service, under 6 NYCRR 622.3(c), is not related at all to the CPLR, unlike personal service, which according to the same regulation, must be "consistent" with CPLR provisions.

"Good Cause" To Open Default

Even though the Department secured proper service of its motion for summary order, the question remains whether "good cause" exists to open the default. I find that good cause exists, given that the officials of the Respondent did not have actual notice of the proceeding when it was still pending, and only learned about it after the order was issued.

The opening of a default here for "good cause" can be equated to the CPLR's provision for relieving a party of a judgment or order based on its "excusable default" [CPLR 5015(a)(1)]. In New York Practice (Second Edition, page 651) David Siegel writes that the courts are liberal in vacating default judgments since they want disputes resolved on the merits. Therefore, the courts, he adds, accept a generous range of excuses, sometimes even vacating deliberate defaults.

Under the CPLR, a motion to vacate a default is normally accompanied by (1) an excuse for the default and (2) an affidavit of merits. Here no formal motion has been made to DEC, but in the interests of expediting a decision, I am considering the papers the Respondent has submitted to the court, with the oral arguments made during our conference calls, as the equivalent of such motion.

As was made clear during our calls, the Respondent does not contest liability for the violations alleged in the motion for summary order. To the contrary, it contests only the penalty, and not the other relief granted by the Commissioner.

In its court petition, the Respondent challenges the civil penalty of $25,300 as, under the circumstances of this matter, "so disproportionate to the alleged offense as to be shocking to one's sense of fairness." This argument is premised upon dealings the Respondent alleges to have had with the State Department of Transportation at about the time of the alleged violations.

According to the Respondent's court petition, DOT advised it on or about July 2, 1986, that the state "had appropriated and/or was in the process of appropriating" its property under powers of eminent domain. The petition then states that DOT later scaled back its appropriation, taking only part of the parcel, but that the pending condemnation procedures caused considerable confusion as to who owned the property and was therefore responsible for tank registration and testing.

The Respondent's claim, as set out above, raises an issue that could affect penalty assessment. Therefore, in conjunction with the excusable default, it warrants re-opening this matter, although strictly on the issue of penalty.

Creating a record on this issue is especially important here, since the record to date is so poorly developed. It is not known, for instance, how the penalty previously assessed by the Commissioner is apportioned among the violations. According to Ms. Drabicki, staff counsel, the penalty was based upon a Department formula figuring the length of violation and periods in which the Respondent is alleged to have had actual knowledge of the regulatory requirements. This formula and Staff's calculations, based on that formula, were not part of its motion papers. As a result, there is no way, absent opening the record, to verify if the formula was applied correctly, based on the circumstances of this matter.

Suggested Hearing Procedure

Department Staff now asserts that, if the default is opened, it can demonstrate the basis for its recommended $25,300 penalty. If the issue is heard, this should be done as a first order of business, since it is Staff's burden to justify its penalty recommendations. After that, the Respondent should be allowed an opportunity to rebut Staff's assertions which are relevant to its penalty calculation, and to explain, by affidavits, any mitigating factors it wants to have considered.

Facts that would be relevant to a penalty calculation, but which are disputed by the parties, should be litigated and the ALJ should make a penalty recommendation to the Commissioner, based on the re-opened record.

CONCLUSION

  1. The Department Staff secured proper service of its motion for summary order.
  2. Even so, the Respondent has demonstrated good cause to open the default in this matter.

RECOMMENDATION

The default in this matter should be opened, but only with regard to the issue of civil penalty. As the Respondent does not contest liability for the violations, there is no alleged basis for reconsidering the granting of the motion for summary order. Nor is there any basis for reconsidering the other directives in the Commissioner's order, dated June 16, 1992. These directives should be considered as remaining in full force and effect.

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