
USCA1 Opinion

	




                            United States Court of Appeals                            United States Court of Appeals                                For the First Circuit                                For the First Circuit                                 ____________________        No. 93-1699                                NORTHEAST DORAN, INC.,                                Plaintiff, Appellant,                                          v.                                  KEY BANK OF MAINE,                                 Defendant, Appellee.                                 ____________________                     APPEAL FROM THE UNITED STATES DISTRICT COURT                              FOR THE DISTRICT OF MAINE                     [Hon. Morton A. Brody, U.S. District Judge]                                            ___________________                                 ____________________                                        Before                             Torruella, Selya, and Stahl,                                   Circuit Judges.                                   ______________                                 ____________________            Alfred  C. Frawley with  whom Peter  D. Lowe and  Brann & Isaacson            __________________            ______________      ________________        were on brief for appellant.            David B.  Van Slyke with whom  Michael Kaplan, Jonathan S.  Piper,            ___________________            ______________  __________________        and Preti, Flaherty, Beliveau & Pachios were on brief for appellee.            ___________________________________                                 ____________________                                   January 28, 1994                                 ____________________                      STAHL, Circuit Judge.   In its complaint, Northeast                             _____________            Doran, Inc. ("Doran") alleged that Key Bank of Maine ("Key"),            mortgagee and subsequent vendor of the property at issue, was            liable   for   clean-up   costs   under   the   Comprehensive            Environmental  Response,   Compensation  and   Liability  Act            ("CERCLA"),  as  amended  by  the  Superfund  Amendments  and            Reauthorization Act  of 1986  ("SARA").   The district  court            dismissed  the  complaint  for  failure  to  state  a  claim,            reasoning that Key's knowledge of potential contamination did            not render it liable under CERCLA.  We affirm.                                          I.                                          I.                                          __                       FACTUAL BACKGROUND AND PRIOR PROCEEDINGS                       FACTUAL BACKGROUND AND PRIOR PROCEEDINGS                       ________________________________________                      In December 1989, Ed Harmon & Sons, Inc. ("Harmon")            purchased property  located at the Skowhegan  Industrial Park            in  Skowhegan,  Maine  ("the property").    The  purchase was            financed with  a mortgage from  Key Bank.   In June  of 1990,            Doran leased the property from Harmon.                        In July of  1991, with  Harmon unable  to meet  its            mortgage payments, Key Bank sought and received a Judgment of            Foreclosure and Order of Sale  from the Superior Court of the            State of Maine  and made plans to  auction the property.   On            October  21, 1991,  Key hired  an  independent consultant  to            conduct a Maine Superlien Site  Assessment ("the assessment")            of  the property.   Two  weeks  later, on  November 7,  1991,            without  having received the  results of the  assessment, Key                                         -2-                                          2            completed its  disclosure statement  for use  in the  auction            prospectus.   Key  stated in  that  document that  it had  no            knowledge of any hazardous materials on the property.                      On November 18,  1991, Key received the  results of            the   assessment,   which    showed   potential   groundwater            contamination on the property.  Key took no steps to make the            results of  the  assessment known  to  bidders prior  to  the            auction.                      At the  auction on  November 21,  1991, Doran,  who            remained in possession  of the property, entered  the highest            bid  and  signed  a  purchase  and  sale  agreement  for  the            property.    When Doran  sought  financing from  Key  for its            purchase of the  property, Key refused, citing  for the first            time the result of the assessment.  Doran, apparently able to            obtain other financing,  purchased the property from  Key via            quitclaim deed on December 17, 1991.                      After purchasing  the property, Doran  notified the            Maine  Department  of  Environmental  Protection  ("DEP")  of            potential  contamination on the property.  DEP assessed costs            against  Doran, the  "owner" of  the  property under  CERCLA.            Doran brought  an action in the United  States District Court            for the  District of  Maine, seeking  a declaratory  judgment            that  Key was  liable  for clean-up  costs  on the  property.            Among other things,  Doran argued that Key,  unlike similarly            situated  secured creditors,  was  not entitled  to  CERCLA's                                         -3-                                          3            "security  interest holder"  exemption and  that  a right  of            action   existed   due  to   Key's  knowledge   of  potential            contamination prior to and at the time of sale.  The district            court  dismissed Doran's  complaint for  failure  to state  a            claim upon  which relief could  be granted, finding  that Key            was  not  a  liable  party  under  CERCLA  and  its  relevant            amendments.  We affirm.                                         II.                                         II.                                         ___                                      DISCUSSION                                      DISCUSSION                                      __________                      "We  review  a  Rule  12(b)(6)  dismissal de  novo,                                                                __  ____            crediting  all allegations in  the complaint and  drawing all            reasonable inferences favorable  to the plaintiff."   Heno v.                                                                  ____            FDIC, 996 F.2d 429,  430 (1st Cir. 1993); see also Scheuer v.            ____                                      ___ ____ _______            Rhodes, 416 U.S. 232, 236 (1974).              ______                      Our  analysis  begins with  CERCLA's  definition of            liable parties.  CERCLA, 42  U.S.C.   9607(a), provides  that            liability for  environmental  clean-up  shall  attach,  inter                                                                    _____            alia, to:            ____                      (1) the owner and operator of a vessel or                      a facility,                      (2)  any  person  who  at  the   time  of                      disposal of any hazardous substance owned                      or operated  any facility  at which  such                      hazardous substances were disposed of . .                      . .                      While   Key,   having   obtained  a   judgment   of            foreclosure on the property, might  appear at first glance to            be an "owner"  or "operator" of the property  for purposes of                                         -4-                                          4            section  9607(a),  CERCLA's   definition  provisions  clearly            dictate otherwise.  Under 42  U.S.C.   9601(20)(A), the terms            "owner" or "operator" "do not include a person, who,  without            participating  in the  management of  a  vessel or  facility,            holds  indicia of ownership primarily to protect his security            interest in the  vessel or facility."  As  we recently stated            in  Waterville Indus., Inc.  v. Finance  Auth. of  Maine, 984                _______________________     ________________________            F.2d 549, 552 (1st Cir.  1993), "the purpose of the statutory            exception, apparent from its language  and statutory context,            is to shield from liability those `owners' who are in essence            lenders holding  title to  the property  as security  for the            debt."   Moreover,  "[s]o  long  as  the  [security  interest            holder] makes a reasonably prompt  effort to divest itself of            its unwelcome  ownership, we  think continued  coverage under            the exception serves its basic  policy:  to protect bona fide            lenders and to avoid imposing liability on owners who are not            in fact  seeking to  profit from  the investment  opportunity            normally presented by prolonged ownership."  Id. at 553.                                                         ___                      Doran  does not allege, nor could it on the record,            that Key's effort  to divest itself of title  to the property            was  anything less  than  "reasonably  prompt."   Id.    More                                                              ___            importantly, in support  of its allegation that  Key held the            property  for  a  purpose  other  than  as  security for  its                                       _____  ____            mortgage  on the property, Doran  cites only the existence of            the  assessment,  and  Key's  withholding  of  its   results.                                         -5-                                          5            Standing  alone, however, the existence of a site assessment,            even   one   which   reveals   the  existence   of   possible            environmental  contamination and which  is concealed from the            eventual purchaser, is  insufficient to remove a  holder from            the   "security  interest   holder"   exception  in   section            9601(20)(A).  See Waterville Indus., 984 F.2d at 554 (holding                          ___ _________________            that   security   interest   holder  exception   in   section            9601(20)(A) applied  despite fact  that security  holder sold            the property "without making full disclosure of the hazardous            wastes or  of  notices of  violation  sent to  [the  security            interest holder]"); see also United  States v. McLamb, 5 F.3d                                ___ ____ ______________    ______            69, 70-74 (4th  Cir. 1993) (similar, where  security interest            holder "learned of the previous oil spill at [property] after            the  foreclosure  but  prior   to  selling  the  property").1            Accordingly, Doran's  complaint fails  to allege  any set  of            facts under which Key could be liable under CERCLA.                      Doran  also  argues  that  the  security   interest            exception  should  not   apply  in  view   of  42  U.S.C.                                                ____________________            1.  Recent  regulations  promulgated  by  the  United  States            Environmental Protection Agency (EPA), though prospective and            not  dispositive  in  the instant  case,  also  indicate that            security interest holders do not compromise their eligibility            for section  9601(20)(A) status  by conducting  environmental            audits.   See  40  C.F.R.  300.1100;  Final  Rule  on  Lender                      ___            Liability Under CERCLA, 57 Fed. Reg. 18,344, 18,353 (Apr. 29,            1992).   See also  McLamb, 5  F.3d at  73  & n.8;  Waterville                     ___ ____  ______                          __________            Indus., 984 F.2d at 553 & n.6.            ______                                         -6-                                          6            9601(35)(C),2  which   holds  liable  those   defendants  who            "owned" and then transferred property with "actual knowledge"            of contamination.  As noted  above, however, Key was never an            "owner" as that term is defined by CERCLA.  See supra  at pp.                                                        ___ _____            4-6.   Nor do we find  any support for Doran's  argument that            section 9601(35)(C)  somehow renders liable parties who would            otherwise fall  under the security interest  holder exception            of  section  9601(20)(A).3    Thus,  we  find  no  means  for            applying section 9601(35)(C) to Key.                                            ____________________            2.  Section 9601(35) provides:                      Nothing in  this paragraph or  in section                      9607(b)(3) of  this title  shall diminish                      the liability  of any  previous owner  or                      operator  of  such   facility  who  would                      otherwise be  liable under  this chapter.                      Notwithstanding  this  paragraph,  if the                      defendant  obtained  actual  knowledge of                      the  release or  threatened release  of a                      hazardous substance at such facility when                      the defendant owned the real property and                      then  subsequently transferred  ownership                      of the property to another person without                      disclosing such knowledge, such defendant                      shall be treated  as liable under section                      9607(a)(1) of this  title and no  defense                      under  section 9607(b)(3)  of this  title                      shall be available to such defendant.            3.  Rather,   the   cases  cited   by  Doran   apply  section            9601(35)(C)  solely to  parties who  were  otherwise "owners"            under section 9607(a).  See, e.g.,  Westwood Pharmaceuticals,                                    ___  ____   _________________________            Inc. v. National Fuel Gas  Distrib. Corp., 964 F.2d 85, 90-91            ____    _________________________________            (2nd  Cir. 1992) (holding that section 9601(35)(C) applies to            "owners"  under both sub-section  (1) and sub-section  (2) of            section  9607(a)); see also Fallowfield Dev. Corp. v. Strunk,                               ___ ____ ______________________    ______            1993 WL 157723,  *5 (E.D. Pa.) ("In order  for [plaintiff] to            establish its  prima facie  case .  .  . it  must prove  that            [defendants] are within one of  the [four] classes of persons            subject to liability under section 9607(a).").                                         -7-                                          7                      In  sum, here, as in Waterville Indus., 984 F.2d at                                           _________________            554, the right of contribution  is a statutory one that turns            solely on  Key's status as  an "owner," a status  defeated by            the  security interest  exception.   Any  other claims  which            Doran  may  have  against Key  are  appropriately  brought in            another forum.  Cf. id.; McLamb, 5 F.3d at  73-74 (finding no                            ___ ___  ______            requirement of "commercial reasonableness" under CERCLA).                                           III.                                         III.                                         ____                                      CONCLUSION                                      CONCLUSION                                      __________                      For  the  foregoing  reasons,  the  order   of  the            district court  dismissing Doran's complaint  for failure  to            state a claim is                       Affirmed.                      _________                                         -8-                                          8
