STATE WATER RESOURCES CONTROL BOARD
WORKSHOP SESSION – OFFICE OF CHIEF COUNSEL
APRIL 5, 2000
ITEM: 6
SUBJECT: IN THE MATTER OF THE PETITION OF LAKE
PUBLISHING COMPANY FOR REVIEW OF A DETERMINATION OF THE DIVISION OF CLEAN WATER
PROGRAMS, STATE WATER RESOURCES CONTROL BOARD, REGARDING REIMBURSEMENT FROM THE
UNDERGROUND STORAGE TANK CLEANUP FUND.
SWRCB/OCC FILE UST-117.
LOCATION: Belmont, CA.
DISCUSSION: In 1992, Lake
Publishing Company (petitioner) acquired real property in Belmont, California,
with multiple underground storage tanks (USTs). The petitioner and the property’s seller set aside $80,000 of the
$1.8 million purchase price for cleanup costs in the event that the seller
failed to clean up the real property prior to the close of escrow. At the close of escrow, contamination
remained at the property so the $80,000 set aside pursuant to the escrow
instructions reverted to petitioner.
Petitioner subsequently
submitted a claim to the Underground Storage Tank Cleanup Fund (Fund) for
reimbursement of the costs it incurred cleaning up the unauthorized
release. Consistent with a prior order
of the State Water Resources Control Board (Board), the Division of Clean Water
Programs (Division) concluded that if the Division reimbursed petitioner for all
its corrective action the petitioner would receive a double payment because it
had already received an $80,000 purchase price reduction to defray corrective
action and other costs. Applying two
Board orders that establish the procedure for determining the amount of double
payment attributable to corrective action, the Division determined that the
actual amount of the double payment to the petitioner would be $42,952. As a result, the Division concluded that the
Fund could only reimburse petitioner for its eligible corrective action costs
in excess of $42,952.
In its petition to the Board,
the petitioner argues (1) that the Division’s interpretation of the contract
was flawed and that the $80,000 did not represent a potential double payment,
and in the alternative, (2) that to the extent the Board determines there has
been a double payment for corrective action costs that means the seller has
effectively paid for the corrective action costs and is entitled to
reimbursement from the Fund. Further,
petitioner has provided the Board a duly executed assignment of the seller’s
rights in favor of petitioner.
The proposed order upholds the Division’s decision
that the $80,000 escrow set aside would constitute a potential double payment
to the petitioner. However, the
proposed order finds merit in petitioner’s contention that the seller has
effectively paid corrective action costs through a purchase price
reduction. Consistent with the proposed
order, a seller who is otherwise an eligible claimant may submit a claim to the
Fund, and the Division may reimburse the seller up to the amount determined to
be a double payment to the purchaser.
Further, the proposed order expands upon the Board’s previous order
concerning the assignability of claims against the Fund. Subject to certain limitations drawn from
previous Board orders, the Board will honor an assignment of rights to
reimbursement from the Fund. As a
result, the proposed order allows the Division to reimburse up to $37,952
($42,952 less the statutory $5,000 deductible) in eligible corrective action
costs under a claim submitted by the seller and further allows the petitioner
to step into the seller’s shoes pursuant to a valid assignment of rights.
The proposed order upholds
the Division’s decision in part.
POLICY ISSUE: Should the
Board adopt the proposed order that permits, in certain circumstances, a seller
who reduced the purchase price of real property in anticipation of future
corrective action costs to seek reimbursement from the Fund and that further
permits, in certain circumstances, a claimant to assign its rights to
reimbursement from the Fund?
FISCAL IMPACT: Minimal fiscal impact. Historically, the Board has only received 1 or 2 claims annually involving purchase price reductions that could be affected by this order. The purchase price reductions were typically less than $100,000.
RWQCB IMPACT: None.
STAFF RECOMMENDATION: Adopt the proposed order.
_______________________________________________________________________
D
R A F T March
23, 2000
STATE OF CALIFORNIA
STATE
WATER RESOURCES CONTROL BOARD
ORDER: WQ 2000-_____ -UST
In the Matter of the Petition of LAKE PUBLISHING COMPANY
for Review of a Determination of the Division of Clean
Water Programs,
State Water Resources Control Board,
Regarding Reimbursement from the Underground Storage Tank
Cleanup Fund
SWRCB/OCC File UST-117
BY THE BOARD:
This order concerns a petition challenging a final division decision issued by the Division of Clean Water Programs (Division). Lake Publishing Company (petitioner) seeks review of the Division’s decision to deny a portion of petitioner’s request for reimbursement from the Underground Storage Tank (UST) Cleanup Fund (Fund). After review of the record, the State Water Resources Control Board (Board) upholds the basis for the Division’s decision, but directs the Division to reimburse petitioner based on the grounds set forth in this order.
This petition raises the issue of
how the Division should analyze a reimbursement request when an eligible claimant
acquires real property at a reduced price and the purchase contract explicitly
contemplates the anticipated costs to clean up contamination from a petroleum
UST. The Board concludes that the
Division must reduce, by the purchase price reduction, any reimbursement from
the Fund to an eligible claimant who acquires real property where the purchase
price was reduced to reflect the anticipated costs to clean up the petroleum
contamination. To this extent, the Board
upholds the Division’s decision.
This petition also raises
correlated issues associated with the purchase price reduction and the
relationship between a seller and buyer.
Application of the double payment prohibition necessarily means that a
seller of real property has borne a portion of the cost to clean up the
contaminated property. Because the Fund
would otherwise have reimbursed the cleanup costs to the eligible claimant
absent the property transfer, someone has incurred corrective action costs that
would otherwise be reimbursable from the Fund.
The appropriate resolution is to conclude that the Division should
regard the buyer of the real property as incurring corrective action costs on
behalf of the seller who reduced the sale price. If a seller is otherwise eligible for reimbursement, the Division
shall reimburse the seller for eligible corrective action costs up to the
amount determined to be a double payment to the buyer. The order expands upon the Division’s
decision in this respect.
In addition, this petition raises
the issue of whether an eligible claimant may assign its rights to
reimbursement from the Fund. The
Legislature has limited participation in the Fund program to persons meeting
certain eligibility requirements. At
the same time, California law favors assignments. This order seeks to harmonize these two policy goals by
permitting assignments under certain conditions. If these conditions are satisfied, the Division may honor the
assignment to another person of an eligible claimant’s rights to reimbursement.
I. STATUTORY, REGULATORY, PROCEDURAL AND FACTUAL BACKGROUND
The Board administers the Fund pursuant to the Barry Keene Underground Storage Tank Cleanup Trust Fund Act of 1989 (Act). (Health & Saf. Code, §§ 25299.10-25299.99.) Subject to statutory requirements, owners and operators of petroleum USTs may request reimbursement from the Fund for their corrective action costs incurred cleaning up contamination from petroleum USTs. (Id., §§ 25299.54, 25299.57.) In addition, the Fund reimburses certain types of compensation that an eligible owner or operator has been ordered to pay third persons. (Id., § 25299.58.)
The Legislature empowered the Board to adopt regulations governing access to and reimbursement from the Fund. (Health & Saf. Code, § 25299.77.) Regulations governing the Fund are codified in title 23, division 3, chapter 18, section 2803 et seq., of the California Code of Regulations.
The Act and Fund regulations
prohibit a claimant from receiving a double payment on account of reimbursement
for any corrective action or third party compensation cost. (Health & Saf. Code, § 25299.54,
subd. (g); Cal. Code Regs., tit. 23, § 2812.2, subd. (b).)[1] To avoid making a double payment when a
claimant recovers funds from another source, Fund staff must ascertain whether
the other source compensated the claimant for costs that the Fund would
otherwise reimburse. (See, Board Orders
WQ 98‑05‑UST, In the
Matter of the Petition of Cupertino Electric, Inc. (Cupertino) and WQ 96‑04‑UST, In the Matter of the Petition of Champion/LBS Associates (Champion).) The Board has recognized
that a double payment may occur when a claimant buys property on which a UST is
located and undertakes the costs of cleanup that would otherwise be borne by
the seller. If the claimant receives
both a reduced purchase price for the property and reimbursement for the costs
that occasioned the reduced purchase price, then the claimant will receive an
impermissible double benefit. (Board
Order WQ 93-2-UST, In the Matter of the
Petition of Bruno Scherrer Corporation (Bruno
Scherrer), at pp. 10-11.)
The Act directs the Board to
review a final decision of the Division within 90 days after receiving a
petition challenging the decision.
(Health & Saf. Code, § 25299.37, subd. (c)(8)(B); Cal. Code Regs.,
tit. 23, § 2814.3, subd. (d).)
Fund regulations allow the Board and petitioner, by written agreement,
to extend the 90-day time limit for a period not to exceed 60 calendar days. (Cal. Code Regs., tit. 23, § 2814.3,
subd. (d).) If the Board does not take
action on a petition within either the 90-day period or the 60-day extension
period, the Board has continuing jurisdiction to review the petition on its own
motion.[2]
Petitioner purchased an office building and construction yard located in Belmont, California from Williams and Burrows, Inc. (Seller) for $1.8 million on February 5, 1988. During purchase negotiations, petitioner became aware that USTs were located at the site. As a result, petitioner negotiated a purchase price reduction because petitioner “surely would not pay the original price for contaminated property.” (Letter from Lake Publishing Co. to Dave Deaner, Fund Manager (Oct. 8, 1997).)
Under the terms of the purchase agreement, Seller agreed to remove six USTs that were located on the property and to deliver the property to petitioner in a clean condition. (Addendum to Purchase Agreement and Deposit Receipt (Addendum) (Dec. 2, 1987), ¶ 7.) The Addendum further provided that:
“If Seller has not performed the
above [removal and cleanup] requirements prior to Close of Escrow, then an
amount of funds shall be retained by the Escrow Company equal to the amount of
funds required for the removal of such underground storage tanks and curing of
such soils problems.” (Ibid.)
Once Seller removed the USTs and
completed the cleanup, the escrow company would release the funds to
Seller. (Ibid.) The parties
negotiated this provision to ensure that funds would be available for the
corrective action work, and to account for the Seller’s liquidity problems. (Request for Final Division Decision from
David Lake, Lake Publishing Co. to Harry M. Schueller, Division Chief (Nov. 21,
1997).)
Seller failed to perform the UST removal and cleanup by the close of escrow, February 5, 1988. In the final escrow statement, petitioner and Seller agreed to set aside $80,000 of the purchase funds to pay for UST removal and cleanup. (Addendum to Escrow Instructions, ¶ A.) The escrow instructions provided that if the $80,000 had not been released in accordance with the Addendum to the purchase agreement (i.e., if Seller failed to remove the USTs and clean up the property) by June 1, 1988, then the escrow company would remit the funds to petitioner.
The USTs were removed on March 25, 1988. At that time, the parties discovered petroleum contamination from one of the six USTs. Because the Seller did not deliver the property in a clean condition, the escrow company remitted $80,000 to petitioner pursuant to the amended escrow instructions.
Petitioner applied to the Fund in October 1992. In October 1997 Fund staff concluded that petitioner would receive a double payment if the Fund reimbursed petitioner’s corrective action costs because petitioner had already received an $80,000 discount on the property that was intended to pay for the costs of UST removal and cleanup. Pursuant to Champion and Cupertino, Fund staff allocated $37,048 of the $80,000 purchase price reduction towards ineligible costs ($5,000 for the deductible, $624 in ineligible corrective action costs, and $31,424 for the UST removal). Fund staff then determined that petitioner must use the remaining $42,952 of the escrow proceeds for corrective action before the Fund could begin reimbursing petitioner.
The Chief of the Division upheld the Fund staff’s decision in a Final Division Decision dated December 23, 1997 (Decision). The Division Chief determined that Seller had paid petitioner for the costs of cleanup by accepting a reduced purchase price for the property. Petitioner timely submitted a petition for review to the Board. As part of its petition, the petitioner submitted an assignment of rights to Fund reimbursement executed January 14, 1998, by the Seller in favor of petitioner. (See Letter from Robert Burrows, Williams & Burrows, Inc. to David S. Lake, Lake Publishing Co. (Jan. 14, 1998).)
The petitioner challenges the Division’s decision. The petitioner contends that the Division misconstrues the purposes of the escrow agreement. Petitioner maintains that the $80,000 in escrow funds paid to the petitioner represented liquidated damages for Seller’s failure to remove and to clean up any release from the USTs. As a result, petitioner contends that the liquidated damages do not represent a potential double recovery, but instead, a penalty to Seller for nonperformance. In the alternative, petitioner argues that $80,000 represents a payment by Seller for corrective action costs. Because Seller has assigned any reimbursement rights it may have to the buyer, the petitioner contends it may recover any reimbursement Seller is entitled to receive.
II. CONTENTIONS AND FINDINGS
1. Contention:
Petitioner maintains that the Division misconstrued the provisions of
the escrow agreement governing the $80,000 payment. Petitioner contends that the Board should not consider the
$80,000 as compensation to the petitioner to pay for corrective action costs
because the $80,000 actually constituted a liquidated damage penalty for
nonperformance by the Seller. As a
result, petitioner maintains that the Board should not consider the $80,000 as
compensation for corrective action and should not reduce petitioner’s
reimbursements from the Fund.
Findings: The
petitioner’s contention does not have merit.
Regardless of whether the $80,000 is denominated “liquidated damages,”
the money would still constitute a double recovery. Liquidated damages reflect the parties’ attempt to estimate the
damage to petitioner (i.e., the cost to clean up the contamination) resulting
from nonperformance by Seller. The
Board considers the $80,000 price reduction compensation for corrective action
costs.
A question of double payment
arises when a claimant receives a reduced purchase price for contaminated
property and seeks reimbursement from the Fund to clean up the property. The Board initially addressed this problem
in Bruno Scherrer:
“Buyers in the position of
petitioner who undertake to pay costs which otherwise must be borne by the
seller normally obtain an adjustment in the price which would otherwise be
charged to the buyer. If there is such
an adjustment in price, and claims against the Fund by the purchaser are
allowed, the result appears to involve a double benefit to the purchaser who
receives both a reduced purchase price and reimbursement for the costs which
occasioned the reduced purchase price.”
(Bruno Scherrer, supra, at pp. 10-11.)
Petitioner’s claim presents this
very issue, and the Board sees no reason to reevaluate this straightforward
legal proposition. The $80,000 of the
purchase price that reverted to petitioner to pay removal and cleanup costs
constitutes a potential double benefit to petitioner.
In effect, petitioner argues that the escrow funds belonged to him and not to Seller (i.e., petitioner did not receive a payment for corrective action from another source, but instead used his own money for corrective action). Ownership of the escrow funds, however, is not at issue here. It appears that petitioner may misunderstand how the issue of double payment arises in the context of a real estate transaction. Typically, double payments occur when a claimant receives funds from another source for its corrective action costs. Here, Seller did not make a direct cash payment to petitioner. Nonetheless, a question of double payment arises when a claimant receives a reduced purchase price for contaminated property and seeks reimbursement from the Fund to clean up the property. (See, Bruno Scherrer, supra, at pp. 10-11.)
Petitioner has explained that the
escrow was established with its money to assure Seller, who had the
responsibility for contracting for UST removal and cleanup, that funds would be
available for the work. (Request for
Final Division Decision from David Lake, Lake Publishing Co. to Harry M.
Schueller, Division Chief (Nov. 21, 1997).)
Petitioner also has noted that it pressed for a reduced purchase price
when it became more aware of the potential financial problems associated with
USTs and the possibility that Seller would file for bankruptcy. (Ibid.)
Thus, petitioner was aware of the
presence of the USTs, the likelihood that the USTs may have contaminated the
property, and the potential financial problems associated with USTs. Petitioner has acknowledged that it
considered these factors when it negotiated with Seller for a reduced purchase
price. (Ibid.) In addition, the
parties intended the $80,000 in reduced purchase price to be used for the UST
removal and cleanup. If the Fund
reimbursed petitioner for its cleanup costs — for which the $80,000 was also
intended — then petitioner would receive a windfall because it would receive
both a discount on the purchase price of the property and Fund reimbursement
for the costs that occasioned the discounted price.
Petitioner maintains that the
$80,000 in escrow funds constituted liquidated damages for Seller’s failure to
perform according to the purchase agreement.
Whether or not the $80,000 was a liquidated damage does not alter the
Board’s analysis.[3] The term “liquidated damages” denotes a
specific sum fixed by the parties to a contract that is to be paid to satisfy a
loss or injury arising from a breach of the contract. (See Civ. Code, § 1671 (establishing the validity of
liquidated damages provisions).) The sum
must represent a reasonable attempt to anticipate the losses that may be
suffered in the event of a breach of the contract. (Weber, Lipshie & Co.
v. Christian (1997) 52 Cal.App.4th 645, 656 [60
Cal.Rptr.2d 677].) Even if the parties
contracted for the payment of liquidated damages, the question of double
payment would still exist because the parties intended the money to satisfy
petitioner’s injuries arising from Seller’s failure to clean up the site. In other words, the parties intended the
money to pay for petitioner’s cleanup costs.
These are the same costs that the Fund would otherwise reimburse. The $80,000 represents a potential double
payment to petitioner if the Board were to reimburse petitioner for all
eligible corrective action costs.
2. Contention:
Petitioner contends that if the Division correctly determined that the escrow
funds actually belonged to Seller, then Seller has the right to reimbursement
from the Fund. To this extent, the
Seller would have paid for corrective action through a lower sale price. Petitioner maintains that the amount the
Division determines to be a double recovery for the purchaser would be the
amount of corrective action paid by Seller.
Findings: The Board has not had occasion to consider
this issue before, but in light of the Legislature’s enumerated goals and
subject to eligibility requirements elsewhere in the Act, the Board finds that
an otherwise eligible seller of real property may submit a claim or join the
purchaser’s claim and seek reimbursement for the costs the Fund determines
would otherwise be a double recovery to the purchaser. To comport with the Act, any reimbursement
pursuant to this analysis cannot result in the Fund reimbursing more than it
would have reimbursed had there only been one eligible claimant who owned the
Belmont property throughout the UST operation, discovery, removal, and cleanup
phases. Fund staff should reimburse the
eligible seller and the eligible buyer together the amount that would have been
reimbursed to a single eligible claimant if there had been no real property
transaction.
The Legislature established the
Fund to help clean up the contamination that too often has accompanied the
underground storage of petroleum. An
important legislative goal enumerated by the Legislature is that the Fund
should operate efficiently to encourage corrective action in the first instance
“by the owner or operator of a leaking underground storage tank.” (Health & Saf. Code, § 25299.10,
subd. (b)(8).) In fact, efficiency
underlies three of the Legislature’s findings concerning the Fund. (Id.,
§§ 25299.10, subds. (b)(1), (7)-(8) and 25299.90, subd. (e) (recognizing
the benefits of reimbursing commingled plume claimants jointly).) The Board, therefore, strives to interpret
the Act in a manner that promotes the efficient clean up of unauthorized
releases, while following the letter of the law.
The Legislature limited the types
of costs the Board may reimburse from the Fund. Broadly, the Board can only reimburse claimants for eligible
corrective action, third party, and regulatory technical assistance costs. (Health & Saf. Code,
§§ 25299.57-.58.)[4] Corrective action encompasses:
“[A]ny activity necessary to investigate and analyze the effects of an unauthorized release; propose a cost-effective plan to protect human health, safety, and the environment and to restore or protect current and potential beneficial uses of water; and implement and evaluate the effectiveness of the activity(ies).” (Cal. Code of Regs., tit. 23, § 2804.)
An eligible claimant may receive
reimbursement for the costs of implementing a corrective action activity,
provided the cost is “reasonable and necessary.” (Health & Saf. Code, § 25299.57, subd. (b)(1).) In order to receive reimbursement for a
claimed corrective action cost, the cost must have been “incurred by or on
behalf of a claimant.” (Cal. Code of Regs., tit. 23, § 2812.2, subd. (b);
see also Health & Saf. Code, §§ 25299.55, subd. (c) and 25299.57,
subd. (b)(1).)
The Board construes section 2812.2, subdivision (b), to allow a purchaser to incur corrective action costs on behalf of a seller through a reduced purchase price. Section 2812.2, subdivision (b) provides that corrective action costs “incurred . . . on behalf of a claimant shall be reimbursable from the Fund.” (Cal. Code of Regs., tit. 23, § 2812.2, subd. (b).) Subdivision (b) continues by stating that “[n]o claimant shall be entitled to double payment on account of any corrective action or third party compensation claim cost.” (Ibid., see also, Health & Saf. Code, § 25299.54, subd. (g).) The regulation continues by identifying certain circumstances where a person might compensate a claimant, but the compensation would not be considered a double payment (e.g., where the claimant is then obligated to repay the person paying on behalf of the claimant).
A purchase price reduction by a seller does not implicate the double payment prohibition with respect to the seller.[5] Nothing in section 2812.2, subdivision (b), restricts reimbursement to a seller for corrective action costs the seller effectively paid through a reduced purchase price. If a seller funds all or a portion of the corrective action through a purchase price reduction, if a seller is otherwise eligible to submit a claim to the Fund, and if a seller is not receiving compensation from another source that would run afoul of the statutory and regulatory double payment prohibition, the Board sees no reason why the claimant-seller should not be reimbursed the amount of the purchase price reduction that would otherwise constitute a double payment to the purchaser.
Construing a purchase price reduction to allow reimbursement of a seller is consistent with the Board’s prior interpretations of “on behalf of” agreements. The “on behalf of” language in section 2812.2, subdivision (b) originated from the Board’s recognition that claimants may not always have funds available to pay for corrective action in the first instance. A person may incur corrective action costs on behalf of a claimant pursuant to an express agreement in place before the costs were incurred. (See, Board Orders WQ 97-06-UST, In the Matter of the Petition of Quaker State Corporation (Quaker State) and WQ 99-02-UST, In the Matter of the Petitions of Hollis Rodgers et al. (Hollis Rodgers).) In the case of a purchase price reduction, the express agreement comes in the form of a contract price that is below the fair market value of the property in a clean state. Further, the purchase contract will typically precede the purchaser undertaking corrective action. Hence, the Board’s present analysis is consistent with the Board’s prior, precedential orders. Moreover, the present analysis affords the parties greater flexibility in managing a site cleanup, thereby promoting the efficiency sought by the Legislature when it enacted the Act.
Absent language to the contrary,
the Board construes a reduction in purchase price as the expression of a
seller’s agreement to assume responsibility for a portion of the property’s
Fund-reimbursable corrective action costs.
For the Fund’s purposes, a purchaser has agreed to incur corrective
action costs on behalf of a seller. The
Board is cognizant that a purchase price reduction frequently includes other
valuable consideration (e.g., a purchaser’s express or tacit agreement to clean
up the contamination relieves a seller of contracting and bidding obligations
and other inconveniences associated with corrective action, and a seller may
receive valuable releases from responsibility and indemnification to insulate
it from further responsibility). In
this sense, the purchase price reduction typically includes a premium above the
anticipated corrective action costs.
Therefore, the purchase price reduction reflects the maximum
reimbursement a seller may receive from the Fund.
A seller’s reimbursement will be
the amount of double payment the Fund staff determine that the purchaser will
receive. In light of the Fund’s offset
procedures as detailed in Cupertino,[6]
the actual double payment amount to a purchaser will typically be less than the
purchase price reduction. The Board
believes that calculating a seller’s reimbursement based on the double
recovery, as opposed to the purchase price reduction, is appropriate. First, the Cupertino “hard costs” used to determine the purchaser’s double
payment are costs associated with the UST that the seller would have borne had
it retained the property and that two parties would most likely account for in
adjusting the sale price of contaminated property. Second, the offset procedure, as applied in the purchase price
reduction context, results in an equitable allocation of costs because the
“hard cost” offset compelled by Cupertino
may be viewed as the premium a seller incurs for not undertaking corrective
action itself.
The Board believes the approach
outlined in this order reflects the Act’s intent and promotes sound public
policy. If an eligible seller and an
eligible purchaser contract to have the purchaser undertake corrective action,
both parties have acknowledged that the most efficient corrective action
approach is to have the purchaser undertake the corrective action. The Act establishes a goal of efficient
corrective action. The Board can honor
the parties’ decision and promote efficiency by reimbursing a seller as
detailed in this order. Further, if the
Board concluded that a seller could not seek reimbursement for its purchase
price reduction, the Fund would recognize a benefit each time contaminated
property sold at a reduced price. This
could unnecessarily chill the transfer of and needlessly stall remediation of
properties the Act was intended to protect.
In the present case, Seller is
entitled to reimbursement of up to $37,952 ($42,952 less the statutory $5,000
deductible) for eligible corrective action costs. As explained above, the Board concludes that the escrow
instructions provided an $80,000 purchase price reduction to pay for corrective
action. This amount constituted the
baseline for determining the petitioner’s double recovery. Division staff then used the offset process
established in Champion and Cupertino to calculate $37,048 in “hard
costs” that could be used to offset the $80,000 price reduction. The amount of double recovery to the
petitioner is therefore $42,952. The
petitioner must incur $42,952 in eligible corrective action costs before it may
be reimbursed under its existing claim.
Any eligible corrective action costs in excess of $42,952 may be
reimbursed to the petitioner’s claim.
The Seller may submit a claim for reimbursement of the eligible
corrective action costs up to $42,952, which will then be decreased by the
statutory deductible.
3. Contention:
Petitioner maintains that to the extent the Seller is entitled to
reimbursement from the Fund, the Seller has assigned petitioner the Seller’s
rights to submit a claim to the Fund and to receive any reimbursement from the
Fund. Petitioner thereby contends that
it is entitled to any reimbursement the Seller would otherwise have received.
Findings: The Division has traditionally not allowed a
claimant to assign its rights to reimbursement from the Fund. However, in light of a strong policy in
California law favoring the assignment of rights and interests in property, the
Board concludes that in certain circumstances a claimant may assign its rights
to reimbursement. Any such assignment
would be governed by principles the Board has already applied to “on behalf of”
agreements. As such, petitioner may
submit a claim to the Fund in Seller’s name and as the assignee of the Seller,
or consistent with long-standing Fund practice and this order, may have Seller
joined on the existing claim as a joint claimant.
The Board has previously addressed
the issue of assignments in Bruno
Scherrer. Bruno Scherrer involved a claim submitted by the Bruno Scherrer
Corporation (Bruno Scherrer), who leased property at which a UST had previously
been operated. The UST had been removed
before Bruno Scherrer acquired the property.
As a result Bruno Scherrer was not eligible to submit a claim because it
was not an owner or operator. Bruno
Scherrer purchased the property agreeing to undertake all further corrective
action. (Bruno Scherrer, supra, p.
9.) At some time after purchasing the
property and after incurring substantial corrective action costs, Bruno
Scherrer received an assignment of rights to reimbursement from the Fund. [7] (Ibid.) In the circumstances presented by Bruno Scherrer, the Board declined to
honor the assignment.
The Board rejected the assignment to Bruno Scherrer relying on two principal factors. First, the Legislature limited access to the Fund to owners and operators of USTs. Bruno Scherrer was neither. (Bruno Scherrer, supra, p.10.) Second, the Board concluded that it would be inappropriate for reimbursement to turn on whether a person had been able to negotiate, after the property’s sale, for an assignment from an eligible claimant. (