News Brief: Appellate Court Holds "Innocent" Landowner Liable FOR Abandoned TanksFall 1995
A recent decision by the Wisconsin Court of Appeals refused to shift liability for cleanup of abandoned leaking underground storage tanks ("USTs" or "LUSTs") from a Property owner to the lessee that had made use of the USTs.
In Bence v. Spinato, a property owner, Bence, had entered into a lease agreement in 1969 under which the initial lessee and/or his gasoline supplier had installed USTs for use as part of a car-wash business. The initial lessee went bankrupt in 1971, but the USTs were left in place. After nine months, Bence re-leased the property to a second lessee, Spinato. Spinato had actually been the operating sublessee of the facility all along, but under separate agreements with the initial lessee. Eventually (and inevitably) the 1971 vintage USTs leaked, and upon discontinuance of gasoline sales in 1988 a cleanup of the contaminated site commenced; Bence picked up the tab and sued for breach of the lease agreement.
Bence argued that under provisions of the second lease agreement, Spinato was responsible for the cleanup.
The second lease contained a provision waiving the lessor’s (Bence’s) right to any trade fixtures. The Court found that this restated the common law but did not work to transfer ownership of USTs existing at the property at the time of the second lease to Spinato, which the Court had already determined were, by abandonment, owned by Bence.
Under a second provision commonly found in lease agreements, Spinato (as lessee) was required to, "...surrender the ... leased premises ..., in as good order and condition as they shall have been at the beginning of the term of [the] lease, ordinary wear and tear and damage by the elements excepted."
Bence argued that contamination was not "ordinary wear and tear and damage by the elements," and that he should be returned a clean site. In perhaps its most significant finding, the Court of Appeals upheld the trial court’s finding that such a general lease provision was not intended to cover LUST contamination and cleanup. In so doing, the Court of Appeals observed that it was the termination of the use of the USTs that triggered the UST removal and ultimately the cleanup, not the degraded condition of the property (i.e., USTs). The Court seemed to imply that even though the lessee, Spinato, had effectively allowed the USTs to degrade and ultimately leak, this was not improper upkeep and maintenance of the leased premises. In effect, the Court found that degradation of USTs and eventual discharge of contamination may be considered "ordinary wear and tear and damage by the elements...."
While the Court acknowledged the harshness of its finding, its refusal to shift liability under older (pre-Spill law) lease provisions, clearly limits the options of ostensibly "innocent" landowners saddled with Spill law cleanup costs.