Monday, January 3, 2011

Residential MTCA Liability: Grey v. Leach

The Division I Court of Appeals recently addressed issues of apparent first impression in the area of hazardous substance contamination on residential real property.  This case should impact, among other things, the way buyers and sellers draft their purchase and sale agreements (especially inspection contingencies) whenever there is a possibility of underground storage tanks on a property.

In Grey v. Leach (Docket No. 63221-3, Filed 12/13/10), the Court granted discretionary review of the King County Superior Court's pre-trial rulings on three affirmative defenses to Model Toxics Control Act ("MTCA") claims.  The issue before the court was whether statutory liability exclusions for "innocent purchasers" (RCW 70.105D.040(3)(b)) or "domestic purposes" (RCW 70.105D.040(3)(c)) applied "to former owners of property where heating oil was released from the residential heating system operated by them during their ownership."  The court also reviewed the issue of whether the terms of the parties' real estate purchase and sale agreement ("REPSA") barred the Greys' MTCA claims as a matter of law.  The Leaches were prior owners of the home, from whom the present owners, the Greys, sought contribution for remediation expenses.

The court held that 1) because the Leaches contributed to the release during their ownership, as operators of the heating system, they were not protected by the innocent purchaser defense and 2) the leaking of fuel oil from the return pipes of an underground storage tank is not an excluded "domestic use" under MTCA.  The court further held that the REPSA did not allocate MTCA liability between the parties.

Important to the court's decision on the MTCA affirmative defenses was its interpretation of the word "contributed", under the innocent purchaser defense, which defense is not available where the owner/operator contributed to the release.  The court held that the concept of contribution to the release of hazardous substances does not include a scienter element (i.e. negligence or intentional conduct).  With regard to the "domestic use" defense, the court held that a leaking underground storage tank is not a"domestic use", despite the fact that home heating oil is a common residential fuel, because the statute does not include the leaking of fuel from a malfunctioning tank system as part of such use.

With regard to the REPSA, the court found that it did not expressly allocate MTCA liability.  The court denied the Leaches' argument that they allocated MTCA liability to the Greys by the inclusion in the REPSA of a right to inspect the property to determine the presence of underground storage tanks.  The court found that the REPSA specifically limited the Greys to determining the presence of tanks, rather than the condition of the tanks or the presence of any contamination.  The inspection the Greys got, consistent with the above inspection right, did not disclose facts indicating contamination.  Under those facts, the court held that the REPSA did not allocate MTCA liability between the parties, and affirmed the trial court's dismissal of that affirmative defense.

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