Caldwell v. Gurley Refining Co.

• Decision Date: 25 February 1985
• Docket Number: No. 84-1030,84-1030
• Citation: 755 F.2d 645
• Parties: , 15 Envtl. L. Rep. 20,316 R.A. CALDWELL, Appellee, v. GURLEY REFINING COMPANY, Appellant.
• Court: U.S. Court of Appeals — Eighth Circuit

Page 645

755 F.2d 645

22 ERC 1588, 15 Envtl. L. Rep. 20,316

R.A. CALDWELL, Appellee, v. GURLEY REFINING COMPANY, Appellant.

No. 84-1030.

United States Court of Appeals,

Eighth Circuit.

Submitted June 15, 1984.

Decided Feb. 25, 1985.

David A. Orsini, Little Rock, Ark., for appellant.

Elton A. Rieves, III, West Memphis, Ark., for appellee.

Before BRIGHT and McMILLIAN, Circuit Judges, and LIMBAUGH, ^* District Judge.

LIMBAUGH, District Judge.

On July 15, 1970, R.A. Caldwell leased certain land to Gurley Refining Company to be used by Gurley as a waste material dumping site. Thereafter, Gurley dumped oil sludge and waste materials from its West Memphis plant into a pit on the leased ground. Although the lease was to run ten years, Gurley terminated it in 1976 representing to Caldwell that the pit had been properly sealed. The pit had not been sealed adequately as hazardous substances leaked from the pit into the St. Francois and Mississippi Rivers.

The Environmental Protection Agency (EPA), the United States Coast Guard and certain Arkansas state agencies informed both Caldwell and Gurley that they would be held responsible for all costs incurred in cleaning the spill.

This action was brought by Caldwell against Gurley Refining Company invoking the provisions of the Declaratory Judgment Act, 28 U.S.C. Sec. 2201. Caldwell requested the District Court to determine his rights and obligations and those of Gurley under the lease and in particular Caldwell's right of indemnity against Gurley, if any, resulting from liability to the EPA for cleanup operations.

At trial, Caldwell claimed that as the result of Gurley's operations under the lease and in violation of its terms, widespread pollution of the navigable streams of the United States and the State of Arkansas had occurred and that he is subjected to the claims of E.P.A. for past and future cleanup operations of the lease site. Gurley contended that the lease was terminated by mutual agreement on February 12, 1976 and the storage pit area became Caldwell's responsibility after that date.

The matter was tried to a jury with interrogatories as to the factual issues being submitted to which the jury answered. On the basis of the jury findings, the court entered a declaratory judgment in favor of Caldwell holding that the lease of July 14, 1970 remained in effect for its full term of ten years and that Gurley is responsible during that term for all pollution occurring to the navigable waterways of the United States and the State of Arkansas and their tributaries from operations of Gurley at the lease site. The court ruled further that if Caldwell "is required to pay any claim or judgment to the state or federal agencies for pollution occurring at the site during the ten year period of the lease", Caldwell is entitled to full indemnity from Gurley.

We affirm the judgment of the trial court.

On this appeal, Gurley suggests there are four areas in which the trial court erred. The first is that the court had no jurisdiction for purposes of declaratory relief with regard to the oil removal since no "actual controversy" existed at the time of the court's action. The second is that Gurley should not be responsible for any cleanup operations as there is no residual liability of a lessee after the lease has terminated. In the third instance, Gurley asserts the credible evidence is that the lease terminated in 1976 and the court could not assess responsibility to it after that date. Finally, Gurley maintains the court erred in giving jury instructions six, seven and eight and interrogatories one through five.

I. Jurisdiction

Gurley maintains that as neither federal nor state authorities have asserted a claim for recovery of the waste cleanup costs against either party, there is no "actual controversy" between the parties. If no actual controversy exists, the court has no jurisdiction to order declaratory relief. (The jurisdictional issue was raised for the first time in post-trial motions).

The law provides that:

"In a case of actual controversy within its jurisdiction ... any court of the United States ... may declare the rights and other legal relations of any interested party seeking such declaration ...". 28 U.S.C. Sec. 2201.

The right to a jury trial in declaratory judgment actions is authorized by Rule 57, Federal Rules of Civil Procedure. The rule also provides that "the existence of another adequate remedy does not preclude a judgment for declaratory relief in cases where it is appropriate."

The jury found from a preponderance of the evidence that Gurley discharged oil or a hazardous substance into the navigable waters of the United States in violation of state and federal statutes as the result of its operations on land leased from Caldwell on July 14, 1970, (the lease was to begin July 15, 1970); that Gurley breached the lease with Caldwell by failing to comply with conditions imposed by the Arkansas Department of Pollution Control and Ecology in its letter of July 17, 1970; that the lease was terminated by agreement of the parties on February 12, 1976, but that at such time Gurley misrepresented to Caldwell it had satisfied the Arkansas Pollution Control Commission as to measures it had taken to prevent pollution and Caldwell relied on this misrepresentation in agreeing to terminate the lease in 1976. There was ample evidence to support these findings and the trial court's subsequent judgment that if Caldwell is required to pay any claim or judgment to the state or federal agencies for pollution occurring at the site during the ten-year period of the lease, Caldwell is entitled to full indemnity from Gurley.

The evidence reveals that in 1969, Gurley had been seeking ways in which it might dispose of its refinery waste matter. Conferences were had with the Arkansas Pollution Control Commission which led to the issuance of a Commission order on February 1, 1970 prohibiting Gurley from discharging its waste on the banks of the Mississippi River or into any of the waters of the State or in any other location where the wastes are likely to cause pollution. Gurley was further ordered to submit an application to the Commission for a permit for a system adequate to dispose of its wastes.

On July 15, 1970, Gurley entered into a ten-year lease with Caldwell to use Caldwell's land as a dumping pit for Gurley's waste. Thereafter, Gurley's waste, which was toxic, was dumped in a pit on Caldwell's land. The Arkansas Commission issued Gurley a permit on September 25, 1970 to operate the waste disposal system at the Caldwell location.

After usage for almost five years, Gurley sought to curtail its operation of the Caldwell land and notified the Arkansas Pollution Control Board that it would cease dumping there on or before September 30, 1975. At this stage Gurley had engineered a disposal system for its waste at an on-plant site in West Memphis, Arkansas.

Authority to cease usage of the Caldwell land for disposal purposes was given Gurley on December 31, 1975, provided he follow certain procedures designed by Irby Seay, Gurley's consulting engineer. This approval admonished Gurley that it did not relieve it "of responsibility in the event that pollution problems occur from these pits in the future."

Gurley did eliminate its dumping on Caldwell's land and paid him an agreed sum of $4,000 as a balance due on the lease. Gurley told Caldwell all requirements of the state and federal environmental protection agencies had been met which induced Caldwell to accept the final payment. Actually, Gurley did not fulfill these requirements and a discharge occurred in 1978 and 1979.

EPA engineers had determined by May 30, 1978 that the pit, seven to ten acres in size, had overflowed into a 15-mile bayou and "that the pit will be a real problem for many years to come if it is allowed to remain as it is now." On July 12, 1978 the EPA notified Caldwell and Gurley by telegram, which was followed later by letter, that an oil pollution incident had occurred at the abandoned Caldwell pit for which each party was considered responsible. The parties were admonished that if they did not remove the pollutant by July 17, 1978, the government would, and "you (Caldwell and Gurley) will then be held responsible for any actual costs incurred by the federal government under limitation set forth in Sec. 311(c) of the Clean Water Act."

Thereafter, Gurley attempted unsuccessfully to remedy the problem and Caldwell was notified by EPA on July 19, 1978 that Gurley's efforts were unsatisfactory and the government would remove the pollutants.

On December 6, 1982, the United States Coast Guard notified Caldwell that harmful oil from the pit was discharged from May 24, 1978 to April 4, 1979 and a hearing was to be held as to "civil penalty proceedings." A preliminary determination was made by the Coast Guard that Caldwell's penalty would be $5,000; however, at the time of trial final assessments had not been made. The Coast Guard told Caldwell that when final penalties were determined, "recovery of these costs will be the subject of a separate action."

Caldwell filed this declaratory judgment action in 1979 but the case was not tried until October 3, 1983.

The Court finds that this brief recitation of the facts gives rise to proper jurisdiction under the Declaratory Judgment Act. 28 U.S.C. Sec. 2201. In determining whether there is an "actual controversy" between Caldwell and Gurley within the meaning of 28 U.S.C. Sec. 2201, the test is whether "there is a substantial controversy between parties having adverse legal interests, of sufficient immediacy and reality to warrant the issuance of a declaratory judgment." Maryland Casualty Co. v. Pacific Coal and Oil Co., 312 U.S. 270, 273, 61 S.Ct. 510, 512, 85 L.Ed. 826 (1941); Lake Carriers' Assn. v. MacMullan, 406 U.S. 498, 506, 92 S.Ct. 1749, 1755, 32 L.Ed.2d 257 (1972). The controversy must be definite and concrete touching the legal relations...