Galen v. Mobil Oil Corp.

• Decision Date: 18 March 1996
• Docket Number: No. CV 95-3686 KMW (RNBx).,CV 95-3686 KMW (RNBx).
• Citation: 922 F. Supp. 318
• Court: U.S. District Court — Central District of California
• Parties: Albert J. GALEN, Executor of the Estate of Albert Levinson, Deceased, Plaintiff, v. MOBIL OIL CORPORATION, a New York corporation; Mobil Exploration & Producing U.S., Inc., a Delaware corporation; and Does 1 through 50, inclusive, Defendants.

922 F. Supp. 318

Albert J. GALEN, Executor of the Estate of Albert Levinson, Deceased, Plaintiff, v. MOBIL OIL CORPORATION, a New York corporation; Mobil Exploration & Producing U.S., Inc., a Delaware corporation; and Does 1 through 50, inclusive, Defendants.

No. CV 95-3686 KMW (RNBx).

United States District Court, C.D. California.

March 18, 1996.

Robert J. Clark, Robert D. Goldberg, Christopher L. Mass, Bienstock & Clark, Santa Monica, CA, for plaintiff.

Ward L. Benshoof, Steven J. Vining, Teri L. Breuer, McClintock, Weston, Benshoof, Rochefort, Rubalcava & MacCuish, Los Angeles, CA, for defendants.

Memorandum of Opinion

WARDLAW, District Judge.

Alleging that Mobil concealed the existence of a sump full of oil field waste and trash on property it sold to Albert Levinson, Levinson's estate (the "Estate") sued Mobil. Mobil now moves for summary judgment on the Estate's rescission, nuisance, trespass, equitable indemnity, unjust enrichment, and declaratory relief claims. The rescission and unjust enrichment claims are time-barred. The sales agreement's express provisions preclude the Estate from making nuisance, trespass, equitable indemnity, and declaratory relief claims. Thus, this Court GRANTS Mobil's motion.

I. THE LEGAL STANDARD FOR SUMMARY JUDGMENT

Summary judgment is proper if no genuine issues of material fact exist, and the moving party is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(c). A party resisting summary judgment has an affirmative obligation to bring forward evidence "on which the jury could reasonably find for the nonmoving party." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 252, 106 S.Ct. 2505, 2512, 91 L.Ed.2d 202 (1986). A mere scintilla of evidence will not suffice. "Where the record taken as a whole could not lead a rational trier of fact to find for the nonmoving party, there is no `genuine issue for trial.'" Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587, 106 S.Ct. 1348, 1356, 89 L.Ed.2d 538 (1986). The non-moving party must "go beyond the pleadings and show `by her own affidavits, or by the depositions, answers to interrogatories, or admissions on file' that a genuine issue of material fact exists." Hopkins v. Andaya, 958 F.2d 881, 885 (9th Cir.1992) (quoting Celotex Corp. v. Catrett, 477 U.S. 317, 324, 106 S.Ct. 2548, 2553, 91 L.Ed.2d 265 (1986)).

II. RESCISSION CLAIM

Mobil argues that the Estate's rescission claim is time-barred because Levinson discovered facts allegedly constituting fraud more than four years before his Estate filed suit against Mobil.

A. Applicable Statute of Limitations

California Code of Civil Procedure Section 337 provides a four-year limitations period for an action on a contract. Cal.Civ.Pro. Code § 337. "The time for an action based upon the rescission of a contract in writing begins to run from the date upon which the facts that entitle the aggrieved party to rescind occurred." Id. § 337(3). However, "where the ground for the rescission is fraud or mistake, the time does not begin to run until the discovery by the aggrieved party of the facts constituting the fraud or mistake." Id.

The parties agree that "facts that allegedly entitle the Estate to rescind" occurred in February 1988 when Levinson purchased the property.¹ Because more than four years elapsed between 1988 and 1995, when the Estate filed suit, its rescission claim is time-barred unless it can show that section 337(3)'s fraud exception applies.

B. Judge Kelleher's Findings

Previous findings of fact and conclusions of law in this case govern the evaluation of the fraud exception. In December 1995, Mobil moved for summary judgment on the Estate's fraud, waste, concealment, and misrepresentation claims. The applicable statute of limitations for these claims is three years. Judge Robert J. Kelleher heard the motion. He found that Levinson had actual or constructive knowledge of the buried sump more than three years before April 14, 1995, the date on which the Estate filed suit. Thus, he held that these claims were time-barred. See Order of Judge Kelleher (January 9, 1996).

Judge Kelleher did not specify the date by which Levinson had actual or constructive knowledge. Thus, this Court must determine whether, under Judge Kelleher's findings, Levinson had actual or constructive knowledge of the sump more than four years before the Estate filed suit.

1. Findings of Fact

a. Purchase of the Land

Albert Levinson purchased a tract of land from Mobil for $3 million on February 19, 1988. Although Mobil had received a $4 million bid for the tract, it accepted Levinson's offer, conditioning its acceptance on his agreeing to forego further soil testing.² In the closing documents, Levinson stated that he had inspected the property and was "satisfied as to its physical and environmental condition, both surface and subsurface...." Breuer Decl.Ex. 1. He also agreed to take the land "as is" and "with all faults." Id.

When the sale occurred, a sump full of oil field waste, tree trunks, construction waste, and trash existed on the property. Uncompacted fill dirt concealed it. However, it did not appear on a map of the tract included in the legal documents memorializing the sale. Id.

b. Pre-purchase "Red Flags"

Arguing before Judge Kelleher, Mobil contended that several pre-purchase "red flags" alerted Levinson to the existence of the sump. In 1987, when he expressed interest in the property, Marlin Brown, a Mobil employee, sent him a packet of documents entitled "Invitation to Bid" and dated March 26, 1987. Brown mailed Levinson another "Invitation to Bid" dated June 1, 1987. Judge Kelleher found that one of these packets contained a map that had originally been prepared as an exhibit to a 1970 lease. It depicted the sump.³

Subsequently, in a telephone conversation, Levinson asked Brown to tell him about the property. Brown did not disclose the existence of the buried sump. Brown Depo. at 47:17-48:9. However, he told Levinson that the tract had been an oil property since World War II and that "the roughnecks weren't as careful in years past with ... oil production, and so there was liable to be ... the usual oil field stuff there." (Id. at 977:5-10.)

c. Post-purchase "Red Flags"

Mobil also claimed that after Levinson bought the tract, he received more "red flags," such as maps depicting the sump and soil contamination reports, alerting him to the sump's existence.

i. Maps

On February 22, 1988, Brown sent letters to the tenants leasing the tract informing them of the sale. He attached the map that had been an exhibit to a 1970 lease and that depicted the sump. He copied them to Robert Cannon, Levinson's office manager. Cannon showed the letters and the maps to Levinson. Cannon Depo. at 111:10-113:2.

Brown also sent a letter to the Deputy Director of California's Division of Oil & Gas, notifying him of the sale of an oil producing property. Brown enclosed a map of the property that did not depict the sump. He copied this letter to Cannon.

ii. Osborne Report

Shortly after the purchase, Levinson commissioned a soil investigation from Osborne Engineering; he wanted to know whether subsurface soil conditions would permit the construction of a tilt-up concrete building. Osborne employee Karl Blaufuss conducted the investigation. In his "Preliminary Soils Engineering Report," dated December 30, 1988, he stated that one purpose of the report was to "determine the type(s) and condition of subsurface soil structures." Blaufuss Decl.Ex. A at 1. Another purpose was to alert readers of the report to the presence of contamination; however, Blaufuss did not analyze the observed contamination or characterize the contaminants. Id.; Blaufuss Depo. at 51:6-16.

The Geotechnical Boring Log appended to the report described samplings of subsurface soil as containing "dark grey to black, wet, soft silty clay with rocks, concrete fragments, iron bars, wires, red bricks, ... tree trunks," "contaminated sand," "sand with a strong gasoline smell," "sandy silt mixed with asphalt," "wood chips," and "lumber." Blaufuss Decl. Appendix. A cross-section map appended to the report depicts a fill that contains "concrete blocks, wood chips, lumber, metal plates, steel bar and contaminated bluish clay." Id. The report did not characterize the contaminants in the contaminated sand.⁴

The report concluded that Levinson could develop the tract but that he would have to clean the property and remove some soil:

Adverse subsurface soil conditions were encountered on the site at the time of the exploration at the locations and to the depth explored. The property is generally satisfactory for the proposed development. Surficial soils are trash filled fill, and must either be removed and replaced with suitable fill, or penetrated by piling to the sound underlying stratum.

Blaufuss Decl.Ex. A at 3. Blaufuss has testified that the report did not conclude that a "sump used exclusively for the purpose of oil fuel waste, such as drilling waste" existed on the property. Blaufuss Depo. at 70:21-24.

Cannon received the report sometime before April 14, 1989. He has testified that he showed it to Levinson.

d. Discovery of Sump

Levinson died in February 1992. The Internal Revenue Service required his estate to appraise all of his holdings. To comply with this requirement, it hired an environmental engineer to complete environmental studies of the tract. In 1993, she discovered the drilling muds and trash commingled in the sump. After testing it, she determined that hazardous materials such as benzene were present. She also found that perched ground water had saturated it and that it was unstable.

2. Conclusions of Law

a. Applicable Law

Section 338 of the California Code of Civil Procedure provides that a party must bring a cause of action for fraud within three years of "the discovery, by the aggrieved party, of the facts constituting the fraud...." Cal.Civ.Pro.Code § 338(d) (West Supp.1995)....