ELR Citation: ELR 20527
No(s). s. 92-1128, -1151 (6th Cir. Mar 9, 1993)

The court holds that landowners were properly denied response costs under the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) because their contractor's cleanup activities were not consistent with the national contingency plan (NCP), but were improperly denied monitoring and investigative costs because consistency with the NCP is not a prerequisite to recovery of such costs. The court also holds that the landowners knowingly purchased contaminated property and are not entitled to rescind their land purchase contract under an "encumbrance" theory after discovering additional environmental contaminants on the property. The court, following the reasoning expressed in Bolin v. Cessna Aircraft Co., 21 ELR 21385, also rules that the district court improperly denied the landowners' claim for attorney fees, because awarding attorney fees in private-party actions under CERCLA §107 is consistent with the policy of CERCLA. The court first holds that although unknown environmental contaminants may diminish the value of realty, they do not constitute an encumbrance sufficient to prevent the transfer of clear title to the contaminated property. An encumbrance is a mortgage, mechanics lien, tax lien, or something that diminishes the value of the title to the property. Moreover, the contract between seller and buyer in this case, which included an agreement by which the seller agreed to clean up hazardous substances found on the property and to restore the land to an environmentally satisfactory condition, provided the trial court with ample evidence that the buyer knew before the purchase that there was environmental contamination on the property. The court next holds that the trial court properly found that the buyer breached the contract with the seller, because the buyer stated that he would not make any further payments on the real estate contract, which is an anticipatory breach under Michigan law. The court next holds that the trial court erred in calculating interest on the seller's monetary award and that she is entitled to both statutory and contractual interest from the date of breach to the date of judgment.

Turning to CERCLA's issues, the court holds that the trial court properly found that one of the buyers and the sellers were responsible parties under CERCLA §107(a), but erred in finding the corporate operator on the property not liable as an owner under CERCLA. The corporate operator had the authority to prevent the contamination of the property by his corporation, and thus, was a responsible party. The court holds that the trial court correctly held that because the cleanup work conducted at the site by the buyers' contractor was not consistent with the NCP, the buyers were not entitled to recover their response costs from the other responsible parties. The trial court found that the cleanup work performed by the buyers' contractor actually created more damage than benefits, since he consolidated nonhazardous material with hazardous material, which resulted in all of the material having to be treated as hazardous. In addition, the contractor's cleanup activities increased the health risks by creating an attractive nuisance and by necessitating repeated human contact with the hazardous material. However, the trial court erred in denying the buyers' claim for initial investigation costs, because consistency with the NCP is not required for the recovery of monitoring and investigative costs.

Finally, the court holds that because it adopts the reasoning of cases such as Bolin, which held that private parties in CERCLA §107's actions may receive attorney fees because they are consistent with CERCLA's policy of allowing recovery of the necessary expenses in the cleanup of hazardous wastes, the district court erred in denying the buyers' claim for attorney fees. The court remands to the district court for a determination of the investigative costs and attorney fees to which the buyers are entitled.

Counsel for Plaintiff-Appellants, Cross-Appellees
Herbert G. Sparrow
Dickinson, Wright, Moon, Van Dusen & Freeman
One Detroit Ctr., 500 Woodward Ave., Ste. 4000
Detroit MI 48226
(313) 223-3500

Counsel for Defendant-Appellee, Cross-Appellant
Mark A. Goldsmith
Honigman, Miller, Schwartz & Cohn
First Nat'l Bldg., 660 Woodward Ave., Ste. 2290
Detroit MI 48226
(313) 256-7756

Before: KEITH and JONES, Circuit Judges; and ALLEN, Senior District Judge.^*