SC Administrative Law Court Decisions

This matter comes before the Administrative Law Judge Division (ALJD or Division) pursuant to the petition of Wayne Lynch and Wayne Lynch d/b/a Jimmy's Pit Stop. Petitioner Lynch requested a contested case hearing challenging the South Carolina Department of Health and Environmental Control's (DHEC or Department) finding that he is the responsible party for the assessment and remediation activities for the underground storage tanks (USTs) located at Jimmy's Pit Stop (UST Permit # 11639) in the Town of Coward, Florence County, South Carolina. The Petitioner applied for and was denied protection under Subpart I of the State Underground Storage Tank Regulations, entitled "Lender Liability." See 25A S.C. Code Ann. Regs. 61-92.280.200 - 280.230 (Supp. 2000). A hearing was held at the offices of the Administrative Law Judge Division on April 4, 2001.

The issue for determination in this matter is whether Petitioner Lynch is "a holder," rather than the owner, of the USTs formerly located at Jimmy's Pit Stop, and, therefore, qualifies for the lender liability exception as defined in 25A S.C. Code Ann. Regs. 61-92.280.200 and 280.210 (Supp 2000), so that he is not responsible for the site assessment at the location.

Having observed the witnesses and exhibits presented at the hearing and closely passed upon their credibility, taking into consideration the burden of persuasion of the parties, I make the following Findings of Fact by a preponderance of the evidence:

1. Notice of the time, date, place and subject matter of the hearing was given to the Petitioner and the Department.

2. The property that is the subject matter of this contested case is located in the Town of Coward, Florence County, South Carolina. It was inherited by the Petitioner, Wayne Lynch (Lynch), upon his grandmother's death in the early 1960's. However, Lynch did not become aware that he had acquired the property until his father's death in 1976. Lynch does not know who constructed the building on the property.

3. When Lynch took possession of the property, it was leased to Rush Oil Company. Rush Oil Company operated a gas service station at the location that utilized underground storage tanks. Although Lynch has been unable to locate a written lease, Rush Oil Company leased the property initially for a ten-year period with an option to renew that was exercised at least once during its occupancy of the property. Therefore, Rush Oil Company leased the location for at least 20 years. For this reason, Lynch believed Rush Oil Company placed the tanks on the property. Rush Oil Company left the property in the late 1970's.

4. On December 8, 1982, Lynch sold the property to Myrtle Lee McAllister. The transaction was "owner financed" by Lynch. After Ms. McAllister discontinued payments to Lynch, he foreclosed on the property on April 29, 1983. The Deed of Foreclosure and Sale re-conveyed the property to Lynch on that date.

5. In late 1983 or early 1984, Lynch entered into an oral agreement to rent the property to Jimmy Carol Weaver for $150.00 a month. Mr. Weaver operated the store under the name of Jimmy's Pit Stop and offered gas for sale. Jimmy's Pit Stop is also known as Facility I.D. # 11639. Therefore, Mr. Weaver was utilizing the underground storage tanks.

6. On November 13, 1996, Lynch sold the property to Nancy Thornhill, Mr. Weaver's daughter, and her husband.

7. As owner of the property in question upon which the underground storage tanks are located, Lynch received paperwork from DHEC regarding the tanks. Although Lynch acknowedged ownership on these forms, he maintains that Mr. Weaver was responsible for the upkeep of the underground storage tanks while he was a tenant on the property.

8. Lynch admitted he received a Notice of Violation (NOV) from DHEC and signed the NOV on the second page above where the owner/representative was designated. He was also aware that the underground storage tanks were subject to being regulated by DHEC.

9. Mark Berenbrok, Section Manager in the Regulatory System Section of the UST program, became involved in the Jimmy's Pit Stop matter when a closure report, dated January 1996, was submitted to DHEC. His section reviewed the report and determined that there was contamination in the soils located around the underground storage tank system in excess of the risk-based screening levels. The project was forwarded to DHEC's Assessment and Corrective Action Division for additional evaluation. The Assessment and Corrective Action Division determined that a standard limited assessment should be conducted at the site. To that end, a letter from personnel of the Assessment and Corrective Action Division was sent to Lynch instructing him that the standard limited assessment (SLA) was due and that the pre-approved cost for the SLA would be applied to the deductible.

10. To Mr. Berenbrok's knowledge, as of the date of this hearing, Lynch had not done any of the assessment work to the property requested by DHEC. The tanks, however, were removed from the property on January 16, 1996 by the Thornhills, prior to their purchase of the property.

Based on the foregoing Findings of Fact, I conclude the following as a matter of law:

1. Pursuant to the Administrative Procedures Act, the Administrative Law Judge Division has jurisdiction to conduct contested case hearings concerning matters governing underground storage tanks. See S.C. Code Ann. § 1-23-310 et seq. (1986 and Supp. 2000); S.C. Code Ann. § 44-2-10 et seq. (Supp. 2000).

2. In weighing the evidence and deciding a contested case on the merits, the Administrative Law Judge must make findings of fact and conclusions of law by a preponderance of the evidence. Anonymous (M-156-90) v. State Board of Medical Examiners, 329 S.C. 371, 496 S.E.2d 17 (1998). The burden of proof rests upon the Petitioner in this case. Id.

3. The Department has regulatory authority over underground storage tank systems pursuant to the SUPERB Act. See S.C. Code Ann. § 44-2-10 et seq. (Supp. 2000). Pursuant to that authority, DHEC has promulgated regulations addressing underground storage tank control, including their proper closure. See 25A S.C. Code Ann. Regs. 61-92.280 (Supp. 2000).

4. Pursuant to Regulation 61-92.280.200 - 280.230, entitled "Lender Liability," Petitioner Lynch applied for and was denied "holder" status by the Department. That Regulation affords protection to those individuals who are "holders." Regulation 61-92.280.200(d) defines a "holder" as the following:

A holder is a person who, upon the effective date of this regulation or in the future, maintains indicia of ownership (as defined in section 280.200(c)) primarily to protect a security interest (as defined in section 280.200(f)(1)) in a petroleum or petroleum product UST or UST system or facility or property on which a petroleum or petroleum product UST or UST system is located. A holder includes the initial holder (such as a loan originator); any subsequent holder (such as a successor-in-interest or subsequent purchaser of the security interest on the secondary market); a guarantor of an obligation, surety, or any other person who holds ownership indicia primarily to protect a security interest; or a receiver or other person who acts on behalf or for the benefit of a holder.

(emphasis added). 25A S.C. Code Ann. Regs. 61-92.280.200(d) (Supp. 2000).

As it pertains to being a "holder," "indicia of ownership" is defined as:

[E]vidence of a secured interest, evidence of an interest in a security interest, or evidence of an interest in real or personal property securing a loan or other obligation, including any legal or equitable title or deed to real or personal property acquired through or incident to foreclosure. Evidence of such interests include, but are not limited to, mortgages, deeds of trust, liens, surety bonds and guarantees of obligations, title held pursuant to a lease financing transaction in which the lessor does not select initially the leased property (hereinafter "lease financing transaction"), and legal or equitable title obtained pursuant to foreclosure. Evidence of such interests also includes assignments, pledges, or other rights to or other forms of encumbrance against property that are held primarily to protect a security interest. A person is not required to hold title or a security interest in order to maintain indicia of ownership.

(emphasis added). 25A S.C. Code Ann. Regs. 61-92.280.200(c) (Supp. 2000). "Indicia" is defined as: "Circumstances which point to the existence of a given fact as probable, but not certain." Black's Law Dictionary 772 (6th ed. 1990).

5. Pursuant to Regulation 61-92.280.210(c)(1) entitled "Foreclosure," Petitioner Lynch is claiming that he is a "holder" of this property because he (re)obtained it through a foreclosure sale after Ms. McAllister discontinued payments in April of 1983. That regulation sets forth:

Indicia of ownership that are held primarily to protect a security interest include legal or equitable title or deed to real or personal property acquired through or incident to foreclosure. For purposes of this subpart, the term "foreclosure" means that legal, marketable or equitable title or deed has been issued, approved, and recorded, and that the holder has obtained access to the UST, UST system, UST facility, and property on which the UST or UST system is located, provided that the holder acted diligently to acquire marketable title or deed and to gain access to the UST, UST system, UST facility, and property on which the UST or UST system is located. The indicia of ownership held after foreclosure continue to be maintained primarily as protection for a security interest provided that the holder undertakes to sell, re-lease an UST or UST system or facility or property on which the UST or UST system is located, held pursuant to a lease financing transaction (whether by a new lease financing transaction or substitution of the lessee), or otherwise divest itself of the UST or UST system or facility or property on which the UST or UST system is located, in a reasonably expeditious manner, using whatever commercially reasonable means are relevant or appropriate with respect to the UST or UST system or facility or property on which the UST or UST system is located, taking all facts and circumstances into consideration, and provided that the holder does not participate in management (as defined in section 280.210(a)) prior to or after foreclosure.

(emphasis added). 25A S.C. Code Ann. Regs. 61-92.280.210(c)(1)(i) (Supp. 2000). The deed from the foreclosure sale was recorded in the Florence County Clerk of Court's office on June 16, 1983, thereby evidencing that the foreclosure transaction did take place and satisfying a portion of the regulation.

6. Regulation 61-92.280.210(c)(2)(i) sets forth the means by which a "holder" can establish an "indicia of ownership." It provides, in relevant part:

A holder establishes that the ownership indicia maintained after foreclosure continue to be held primarily to protect a security interest by, within 12 months following foreclosure, listing the UST or UST system or the facility or property on which the UST or UST system is located, with a broker, dealer, or agent who deals with the type of property in question, or by advertising the UST or UST system or facility or property on which the UST or UST system is located, as being for sale or disposition on at least a monthly basis in either a real estate publication or a trade or other publication suitable for the UST or UST system or facility or property on which the UST or UST system is located, or a newspaper of general circulation (defined as one with a circulation over 10,000, or one suitable under any applicable federal, state, or local rules of court for publication required by court order or rules of civil procedure) covering the location of the UST or UST system or facility or property on which the UST or UST system is located.

25A S.C. Code Ann. Regs. 61-92.280.210(c)(2)(i) (Supp. 2000). However, subsequent to the foreclosure sale, Petitioner Lynch did not list the property for sale using any of the above means. Rather, Lynch entered into a month-to-month oral lease, or, as the Petitioner called it, a "gentleman's agreement," with Mr. Weaver with no structured terms.

Another exception under the above regulations is if the Petitioner had entered into a "lease financing transaction" subsequent to the foreclosure sale. See Regulation 61-92.280.200(c) and (f)(1); Regulation 61-92.280.210. A "lease financing transaction" is basically a rent-to-own agreement between the lessor and lessee where the lessor, as "holder" of the property, exerts limited control. However, as the lease agreement between the Petitioner and Mr Weaver was oral, there was no evidence that Lynch qualified for this exception.

7. By claiming that he is exempt from the responsibility of the standard limited assessment under the "Lender Liability" regulations found at 25A S.C. Code Ann. Regs. 61-92.280.200 - 280.230 (Supp. 2000) because of the April 1983 foreclosure, the Petitioner maintains that these regulations should be applied retroactively as this regulation went into effect on March 28, 1997.

The cardinal rule in determining whether a statute will have prospective or retroactive application is that the intent of the legislature controls. Carolina Power & Light Co. v. Town of Pageland, 321 S.C. 538, 543, 471 S.E.2d 137, 140 (1996). A statute is not to be applied retroactively unless that result is so clearly compelled as to leave no room for doubt. The statute must contain express words evincing an intent that it be retroactive or words necessarily implying such an intent. The only exception to this rule is a statutory enactment that effects a change in remedy or procedure. American Nat'l Fire Ins. Co. v. Smith Grading and Paving, Inc., 317 S.C. 445, 448, 454 S.E.2d 897, 899 (1995). See also Snavely v. Perpetual Fed. Sav. Bank, 306 S.C. 348, 350, 412 S.E.2d 382, 384 (1991) (noting the presumption that statutory enactments apply prospectively rather than retroactively in their operation unless there is a specific provision of clear legislative intent to the contrary).

Regulations 61-92.280.200 - 280.230 became effective on March 28, 1997. Based on the specific language found in the regulation, it is evident that the legislative intent was that the regulation be applied prospectively. In Section 280.200(d) of Regulation 61-92, the language sets forth: "A holder is a person who, upon the effective date of this regulation or in the future, maintains indicia of ownership . . . ." (emphasis added). Furthermore, Section 280.210, the section under which Petitioner Lynch is claiming his exemption, begins: "The term 'participating in the management of an UST or UST system' means that, subsequent to the effective date of this subpart, the holder is engaging in decision-making control of, or activities related to, operation of the UST or UST system, as defined herein." (emphasis added). Therefore, even applying the date most favorable to the Petitioner - that is, the November 13, 1996 date on which he sold the property to the Thornhills - Mr. Lynch cannot invoke the protection of a regulation passed over three months subsequent that contains express language to the contrary. In summary, even if Petitioner Lynch could invoke the protections afforded in these regulations, he would be precluded from doing because the regulation is not retroactively applicable.

Based upon the above Findings of Fact and Conclusions of Law, I hereby ORDER that Petitioner Lynch does not meet the requirements of 25A S.C. Code Ann. Regs. 61-92.280.200 and 280.210 (Supp 2000) so that he may qualify for the lender liability exception of not being responsible for the site assessment at the location known as Jimmy's Pit Stop.

AND IT IS SO ORDERED.

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Ralph King Anderson, III

Administrative Law Judge

October 18, 2001

Columbia, South Carolina