ELR Citation: ELR 20547
No(s). 3-84-00278 (Bankr. E.D. Tenn. Jan 17, 1986)

The court holds that a conveyance by a trustee in bankruptcy of a hazardous waste facility was not an impermissible abandonment of property designed to avoid cleanup liability and response costs incurred by Tennessee at the facility are not entitled to priority as administrative expenses under §503(b) of the Bankruptcy Code. The trustee sought to abandon various fixtures owned by the debtor on leased land, including tanks containing hazardous waste, by conveying them to the lessor. The court holds that this conveyance of estate property to a separate, solvent entity was not an impermissible abandonment designed to avoid liability under the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA). The court distinguishes In re Quanta Resources Corp., 14 ELR 20563, where the abandonment would simply have reverted title to a hazardous waste site to the debtor, which had no assets and thus could not clean up the property. The court holds that the conveyance was not an impermissible attempt to transfer liability under CERCLA §107(e)(1). The act of conveying the property out of the estate does not transfer the liability already incurred by the estate in connection with the property.

The court next holds that response costs incurred by Tennessee are not "actual, necessary costs of preserving the estate" under Bankruptcy Code §503(b) and are thus not entitled to priority as administrative expenses. The court distinguishes In re T.P. Long Chemical Inc., 15 ELR 20635, where the court held that costs incurred by the Environmental Protection Agency in cleaning up drums that were property of the estate were administrative expenses. Here, the property that was conveyed by the trustee in compliance with the notice procedures of the Bankruptcy Code was not a part of the estate when the response costs were incurred. Thus, any response costs incurred in connection with this property cannot be necessary to preserve the estate and are not entitled to administrative priority. Even the portion of Tennessee's expenses relating to property that was not conveyed out of the estate, including over 80 drums of hazardous waste, is not entitled to such priority. The court holds that 28 U.S.C. §959(b), which imposes on the trustee the state law property management duties and liabilities of an owner, does not bring Tennessee's expenses to the level of administrative priority. On its face, §959(b) appears to subject the trustee to liability under state environmental laws and thus the expenses would be "necessary" because the trustee would be required to pay them by law. However, an examination of the statute in its entirety reveals that it was intended to allow actions against the trustee only for acts in carrying out the debtor's business, which was not waste disposal.

Counsel for State of Tennessee
W.J. Michael Cody, Attorney General; Michael D. Pearigen, Ass't Attorney General
450 James Robertson Pkwy., Nashville TN 37219
(615) 741-6474

Counsel for Trustee
Ferdinand Powell Jr.
115 E. Unaka Ave., Johnson City TN 37605
(615) 926-0716

Counsel for Debtor
Robert M. Child
Child, O'Connor & Petty
15th Fl., Third Nat'l Bank Bldg., P.O. Box 1066, Knoxville TN 37901
(615) 525-7115