recover its clean-up costs, the Mirabiles joined American Bank as a third-party defendant. During its four-month ownership American Bank took steps to secure the property, showed the property to prospective purchasers, and made inquiries as to the removal of the drums of hazardous waste.
The Mirabile court found that regardless of the nature of title American Bank received, the actions after foreclosure were undertaken merely to protect its security interest in the property and did not constitute an attempt to participate in the management of the site. Mirabile, 15 Envtl.L.Rep. at 20,996. Thus, exemption from CERCLA liability applied as long as a lender limited its activities to the financial aspects of management and did not become too embroiled in the "nuts-and-bolts, day-to-day production aspects of the business". Id. at 20,995. Foreclosure and repurchase were natural consequences in protection of a security interest.
The Maryland Bank & Trust court held that when a mortgagee becomes an owner of the property, the security interest exemption is lost. There, Maryland Bank foreclosed on the mortgage, took title and had owned the property for nearly four years when the EPA sued for recovery costs. Through examination of the statutory language of 42 U.S.C. § 9601(20)(A) the court determined that the use of the present tense indicated the security interest must exist at the time of clean-up. Maryland Bank & Trust, 632 F. Supp. at 579.
The court reasoned that the purpose of the security exemption was to protect secured lenders in common law states where the mortgagee holds legal title to the mortgaged realty until satisfaction of the underlying loan obligation. Id. Furthermore, the court found that exemption of Maryland Bank would contradict the policies underlying CERCLA. If Maryland Bank were exempted from liability, the federal government would shoulder the clean-up costs while the bank would enjoy a windfall by the increased value of the improved land and a possible sale at a profit. Id. at 580. Extending the interest exemption to lenders holding full title to properties would frustrate the distribution of clean-up costs achieved by CERCLA as well as reallocate the risks assumed in owning real property. Id.
The 1986 amendments to CERCLA lend support to the narrow reading of the security interest exemption in Maryland Bank & Trust. State and local governments acquiring "ownership or control involuntarily through bankruptcy, tax delinquency, abandonment" or similar means were excluded from liability as owners or operators. 42 U.S.C. § 9601(20)(D) (West Supp. 1989). "Any person who owned, operated, or otherwise controlled activities at [the] facility immediately beforehand" are held liable. 42 U.S.C. § 9601(20)(D) (West Supp. 1989). That Congress did not simultaneously amend the statute to exclude from liability lenders who acquire property through foreclosure might indicate that Congress intended to hold them liable as owners. See Tom, Interpreting the Meaning of Lender Management Participation Under Section 101(20)(A) of CERCLA, 98 Yale L.J. 925, 926 (1989).
We find the concern expressed in Maryland Bank & Trust, that an exemption for landowning lenders would create a special class of otherwise liable landowners, and the failure of the 1986 amendments to specifically exempt mortgagees-turned-landowners persuasive. When a lender is the successful purchaser at a foreclosure sale, the lender should be liable to the same extent as any other bidder at the sale would have been.
In the instant action we find that the security interest exemption of 42 U.S.C. § 9601(20)(A) does not apply for the period the Bank was record owner of the Berlin Property. During that period the Bank was a potentially responsible party as defined in 42 U.S.C. § 9607(a)(2).
C. THE EXISTENCE OF A DISPOSAL OF HAZARDOUS WASTE DURING THE BANK'S OWNERSHIP OF THE BERLIN PROPERTY
Rule 56(c) of the Federal Rules of Civil Procedure mandates that the non-moving party must "make a showing sufficient to establish the existence of an element essential to that party's case, and on which that party will bear the burden of proof at trial." Celotex v. Catrett, 477 U.S. 317, 322, 106 S. Ct. 2548, 91 L. Ed. 2d 265 (1986). As part of its prima facie case, a claimant must demonstrate that a release or threatened release of hazardous substances from the site has occurred. Artesian Water Co. v. Government of New Castle County, 659 F. Supp. at 1278; Maryland Bank & Trust Co., 632 F. Supp. at 576. A former owner or operator is liable under CERCLA only if hazardous wastes were disposed of during the time that person owned or operated the site. 42 U.S.C. § 9607(a)(2); Cadillac Fair View/Cal., Inc. v. Dow Chem. Co., 21 Env't Rep.Cas. (BNA) 1108, 1113 (C.D.Cal. Mar. 5, 1984). The Bank maintains that BFG and plaintiffs have failed to meet their burdens of proof in this regard.
The terms "release" and "disposal" have broad definitions. Although the definitions are not synonumous, leakage of hazardous waste into the environment is a common element.
It is important to recognize that "disposal" is not limited to a one-time occurrence. "There may be other disposals when hazardous materials are moved, dispersed, or released during landfill excavations and fillings." Tanglewood East Homeowners v. Charles-Thomas, Inc., 849 F.2d 1568, 1573 (5th Cir. 1988).
That the Bank was aware that drums containing hazardous material were on the Berlin Property during its ownership is not in dispute. Also, testimony corroborates that some of the drums of hazardous waste were personally observed to be without tops and in a rusted condition. Water dripped from the ceiling and the floor was cracked. Any liquid accumulating on the floors was swept into the alleys surrounding the Berlin Property by Season-All employees.
We find that plaintiffs and BFG have made a sufficient showing of a release and disposal of hazardous waste at the Berlin Property during the Bank's ownership to escape summary judgment.
D. COMMON LAW CLAIMS OF PLAINTIFFS AND BFG
We reserve judgment on the merits of the common law and state law claims of plaintiffs and BFG. However, to the extent those theories of liability "derive from a common nucleus of operative fact" and "would ordinarily be expected to [be tried] . . . in one judicial proceeding," we retain pendant jurisdiction to hear those claims. United Mine Workers v. Gibbs, 383 U.S. 715, 725, 86 S. Ct. 1130, 16 L. Ed. 2d 218 (1966).
An order follows.
AND NOW, September 1, 1989, the orders of September 24, 1978 and October 26, 1987, are vacated. Defendant BFG Electroplating and Manufacturing may proceed with its cause of action against third-party defendant, National Bank of the Commonwealth, under CERCLA as a former "owner or operator" for the period the Bank had record title to the Berlin Property.
Plaintiffs may proceed with their Rule 14 claim against the Bank under CERCLA as a former "owner or operator" for the period the Bank had record title to the Berlin Property.
We reserve judgment on the merits of the common law and state law claims.
The motion for summary judgment by the National Bank of the Commonwealth is denied.