ELR Citation: ELR 21116
No(s). 90-5861 (6th Cir. Jun 21, 1991)

The court upholds a district court's decision that a bank, which mortgaged property may not use the innocent purchaser defense and must allow the former owner, who constructed a levee on the property in violation of §404 of the Federal Water Pollution Control Act (FWPCA) access to the land in order to restore its wetlands character. The former owner built a substantial levee on the property, for agricultural purposes five months before the bank mortgaged the property without inspecting it. The owner then defaulted on the loan and the bank acquired the property. The government sued the former owner for his §404 permit violation, and as part of his settlement with the United States he agreed to restore the wetlands by degrading the levee. The bank refused to allow access to the property for this purpose, claiming that it acquired the land without knowledge of any illegality and had no duty to compromise the agricultural value of the property. The court holds that the district court properly disallowed the bank from using the innocent purchaser defense because a simple site inspection would have revealed the illegal levee. The bank acted imprudently if it lent one-quarter million dollars without inspecting the property, and acted no less imprudently if it saw the new levee and failed to see if the necessary permits had been obtained.

Counsel for Plaintiff
Albert M. Ferlo Jr.
Environment and Natural Resources Division
U.S. Department of Justice, Washington DC 20530
(202) 514-2000

Counsel for Defendants
Sammie L. Arnold
Ashley, Ashley & Arnold
322 Church Ave., P.O. Box H, Dyersburg TN 38024
(901) 285-5074

Before NELSON and SUHRHEINRICH, Circuit Judges, and HACKETT, District Judge.^*