995 F.2d 925 (9th Cir. 1993), 91-15879, In re Jensen

Docket Nº:91-15879.
Citation:995 F.2d 925
Party Name:Bankr.Cas.2d 101, 23 Envtl. In re Robert Burns JENSEN; Rosemary Tooker Jensen, Debtors. CALIFORNIA DEPARTMENT OF HEALTH SERVICES, Appellant, v. Robert Burns JENSEN; Rosemary Tooker Jensen, Appellees.
Case Date:June 15, 1993
Court:United States Courts of Appeals, Court of Appeals for the Ninth Circuit

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995 F.2d 925 (9th Cir. 1993)

Bankr.Cas.2d 101,

23 Envtl.

In re Robert Burns JENSEN; Rosemary Tooker Jensen, Debtors.



Robert Burns JENSEN; Rosemary Tooker Jensen, Appellees.

No. 91-15879.

United States Court of Appeals, Ninth Circuit

June 15, 1993

Argued and Submitted Jan. 14, 1993.

Timothy R. Patterson, Deputy Atty. Gen., San Diego, CA, for appellant.

Terrance L. Stinnett, Goldberg, Stinnett & MacDonald, San Francisco, CA, for appellees.

D.J. Baker, Weil, Gotshal & Manges, Houston, TX, David R. Berz and David B. Hird, Weil, Gotshal & Manges, Washington, DC, for amici curiae Circle K. Corp. and affiliates.

Ward T. Kelsey, Asst. Counsel, for amicus curiae Commonwealth of Pennsylvania.

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R. Claire Guthrie, Deputy Atty. Gen., for amicus curiae Commonwealth of Virginia.

Beryl I. Dulsky, Asst. Atty. Gen., for amicus curiae State of Ariz.

Beverly Yale Pfeiffer, Asst. Atty. Gen., for amicus curiae State of OH.

Brian Chally, Senior Deputy Atty. Gen., for amicus curiae State of Nev.

Tom Udall, Atty. Gen., for amicus curiae State of N.M.

Brian J. Zwit, Asst. Atty. Gen., for amicus curiae State of Tex.

Appeal from the United States Bankruptcy Appellate Panel of the Ninth Circuit.

Before ALDISERT, [*] GOODWIN, and FLETCHER, Circuit Judges.


The California Department of Health Services ("California DHS") appeals the decision of the Bankruptcy Appellate Panel that its claim against Robert Burns Jensen and Rosemary Tooker Jensen for cleanup of hazardous waste at the Jensen's former business property was discharged in the couple's bankruptcy. We have jurisdiction over California DHS's timely appeal pursuant to 28 U.S.C. § 158(d) (1988). We affirm.

I. Facts

A decade ago, the Jensens owned a closely-held corporation called the Jensen Lumber Co. ("JLC") and briefly operated its lumber business. 1 On December 2, 1983, JLC filed a voluntary Chapter 11 bankruptcy petition; the company had been in business only since May 1983.

Several weeks after the petition was filed, on January 25, 1984, an inspector from the California Regional Water Quality Control Board ("California Water Board") visited the inactive JLC site and noticed a large, cinder-block tank. The tank contained about 5,000 gallons of a lumber fungicide. JLC had used the "dip tank" and fungicide solution to treat the lumber it processed. The solution contained toxic chlorinated phenols (including pentachlorophenal, or "PCP").

By letter dated February 2, 1984, the California Water Board inspector expressed his concern to Robert Jensen that any release of the solution "through accident or vandalism.... would probably cause a major fish kill in the South Fork Trinity River and could possibly affect the health of downstream water users." 2 ER at 27. The inspector requested prompt action to prevent such a catastrophe, and advised Robert Jensen that he should either find another operating lumber mill that could use the fungicide, or contact an appropriate hazardous waste removal company.

The Jensens' attorney at the time responded by letter dated February 10, 1984. He advised the California Water Board that JLC would "almost certain[ly]" go completely out of business and that its bankruptcy case likely would be converted to a Chapter 7 proceeding. He also informed the California Water Board that JLC "has no funds available to dispose of the lumber fungicide." ER at 28. On February 13, 1984, the Jensens filed a Chapter 7 personal bankruptcy petition. On March 20, 1984, as predicted, JLC converted its pending corporate Chapter 11 proceedings to a Chapter 7 liquidation.

The California Water Board brought the California DHS in to assist in removing the fungicide on March 23, 1984. On May 18, 1984, a California DHS waste management specialist supervised the removal of the solution

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from the six foot by six foot by twenty foot dip tank. The California DHS specialist noticed spillage inside the building housing the tank, and evidence of leakage on the river side of the building. He took soil samples, which revealed varying concentrations of PCP contamination; the worst contamination seemed to be located, not surprisingly, in and around the dip tank. Initial estimates of the volume of fungicide in the tank had been about 3,000 gallons. In fact (as suggested above), about 5,000 gallons were pumped into the waste removal tanker, filling it to capacity. 3

The Jensens' personal bankruptcy case was closed on February 20, 1985. No assets were distributed to creditors. The JLC corporate bankruptcy proceedings closed March 18, 1987. On March 30, 1987, California DHS notified Robert Jensen that it considered him a responsible party liable for the cleanup of the hazardous waste at the JLC site. Rosemary Jensen was later named a potentially responsible party.

Eventually, having been unable to persuade the Jensens or other involved parties to undertake independently the cleanup operation, California DHS developed its own remedial action plan. California DHS has spent over $900,000 at the JLC site (including areas other than the dip tank). The Jensens, doing business as JLC, have been allocated ten percent financial responsibility for the cleanup.

On December 5, 1988, the Jensens' personal bankruptcy proceedings were reopened to permit them to list California DHS and the other parties to the JLC site cleanup as creditors. Their adversary proceeding complaint, dated April 24, 1989, sought a determination that their pro rata share of the cleanup expenses had been "discharged by the granting of the discharge to the debtors herein on July 23, 1984." ER at 7-8.

Ruling on cross-motions for summary judgment, the bankruptcy court determined that California DHS's cleanup recovery claim "arose postpetition and is not subject to discharge." In re Jensen, 114 B.R. 700...

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