Hoyt Street Prop. v. Burlington Northern Ry.
| Decision Date | 14 January 1999 |
| Docket Number | No. CIV. 98-1198-AS.,CIV. 98-1198-AS. |
| Citation | 38 F.Supp.2d 1185 |
| Court | U.S. District Court — District of Oregon |
| Parties | HOYT STREET PROPERTIES, L.L.C., an Orregon limited liability company, Plaintiff, v. BURLINGTON NORTHERN & SANTA SANTA FE RAILWAY COMPANY, a Delaware corporation, Defendants. |
Richard H. Allan, Richard J. Stone, Ball Janik LLP, Portland, for Hoyt Street Properties LLC, Oregon Limited Liability Company, Plaintiffs.
John P. Ashworth, Bullivant Houser Bailey, Pendergrass & Hoffman, Portland, for Burlington Northern & Santa FE Railway Company, Delaware Corporation, Defendants.
This action raises the issue of who is legally responsible for the costs incurred in the environmental clean up of real property referred to by the parties as the Hoyt Street railyard (the "Property"). Hoyt Street Properties, L.L.C., an Oregon limited liability company ("Plaintiff"), is the present owner of the Property. Defendant Burlington Northern & Santa Fe Railway Company ("Defendant"), or its predecessors, owned and occupied the Property from 1906 to 1988. In 1988, Defendant sold the Property to Glacier Park Company, a wholly-owned subsidiary of Defendant, and leased the Property back pursuant to the terms of a Lease Agreement and Easement dated May 26, 1988 (the "Lease"). Defendant maintained uninterrupted possession of the Property under the Lease through December 31, 1998, when the Lease expired.
Plaintiff contends that Defendant is solely responsible for the clean-up costs of the Property pursuant to the terms of the Lease. Defendant argues that the Lease does not address environmental clean-up costs and imposes no obligation on Defendant to contribute to the clean-up costs incurred by Plaintiff. Additionally, Defendant contends that Plaintiff's claims under the Lease are premature and should be dismissed.
Defendant has used the Property as a major railway station which, at various times, consisted of switching tracks, passenger and freight terminals, docks, car shops, washing facilities, battery shop and diesel fueling station. The fueling facility, which has been in use since 1943, required the installation and use of a number of fuel storage tanks, both above and underground. As of April 1991, at least one underground lube oil tank and one aboveground diesel fuel tank remained in service.
By early 1988, an employee of Defendant had advised Defendant that at least nine separate areas of the Property were "probable areas of major environmental concern." This report was confirmed and expanded upon in February 1998 and January 1990 by two independent contractors retained to prepare environmental assessments for the Property. In September 1991, the Oregon Department of Environmental Quality ("DEQ") documented the release of a number of hazardous substances on the Property. The Property was determined to pose a "significant threat to public health, safety, welfare, or the environment," and was added to the DEQ's "Confirmed Release List". DEQ authorized Defendant to conduct a preliminary assessment for the Property, noting that Defendant had "assumed responsibility for the investigation and cleanup of the contamination."
When Defendant failed to assume the responsibility for monitoring the cleanup of the Property on its own, DEQ listed the Property on its "Inventory of Hazardous Substance Sites" and identified it as a "high priority project" for clean-up in December 1992. DEQ continued, unsuccessfully, to encourage Defendant to voluntarily participate in the cleanup of the Property. In October 1994, DEQ advised Defendant that the complexity of the Property cleanup required a formal agreement and proposed acceptable terms. At this point, Defendant began denying liability for the cleanup and attempted to shift responsibility to Plaintiff. DEQ referred the Property to the enforcement program for cleanup and issued a Consent Order in August 1995 directing Defendant to determine the nature and extent of the contamination and propose appropriate removal or remediation measures. Defendant has yet to comply with the terms of the Consent Order.
In the early 1980's, the City of Portland (the "City") began investigating the most beneficial use of the industrial areas along the Willamette River, which included the Property (the "River District"). The focus of the investigation narrowed to retail and residential development and, in March 1988, just prior to the transfer of the Property from Defendant to Glacier Park and the execution of the Lease, the City Council adopted an ordinance that required residential development of the Property with a minimum of 15 dwelling units per acre.
In an effort to encourage timely private development and public investment in the River District, the City Council adopted a plan in which it specifically expressed its vision to extend the downtown northward to the River District (the "Plan"). The Plan emphasized the desire of the City to "encourage a rich urban environment, with housing that reflects the income diversity of the City as a whole, an active street life, a strong network of pedestrian connections, significant open spaces which capitalize on the proximity of the district to the river, and a diversity of architectural styles and scales appropriate to an urban development." The Plan requires "a high density, mixed-use development of the Property which will consist primarily of new residential projects such that, at full build-out, approximately 2,000 to 3,000 new housing units will be built on the Property" and "a series of public and private infrastructure improvements in the area in support of the private development of the Property."
Plaintiff acquired the Property in 1994 and entered into an agreement with the City in September 1997 which set forth a general description of the proposed development of the Property pursuant to the Plan, allocated the responsibilities of the parties and created a time line (the "Development Plan"). The City agreed to remove and reconstruct streets, construct a new streetcar system and develop two parks within the River District and to commence their work on the Property by March 8, 1999. Plaintiff agreed to defend, indemnify and hold the City harmless from any claims resulting from the presence or release of hazardous substances on the Property.
Section 11 of the Lease provides:
Lessee shall indemnify, defend, and hold Lessor and Lessor's affiliated companies, its or their officers, directors, employees, agents and contractors, harmless against and from all claims (including, without limitation, actions, demands, expense, costs, attorneys' fees, court costs and judgments) including, but not limited to, claims for death of or injury to persons whomsoever or loss or destruction of or damage to property whatsoever in any way arising out of or caused or contributed to by the Lessee's presence on or use of the Premises during the term of this Lease including any holdover period, but not otherwise, except when such claims are caused by the sole negligence of Lessor or Lessor's affiliated companies, its or their officers, directors, employees, agents or contractors. The provisions of this Paragraph shall survive the termination of this Lease. For purposes of this Paragraph 11, Lessee shall not be considered an affiliate of Lessor or of Burlington Resources Inc., or any of its subsidiaries.
Section 13 of the Lease provides:
Upon termination of this Lease, Lessee shall have the right to remove and Lessor shall have the option to require Lessee to, at Lessee's sole cost and expense, remove or cause to be removed all buildings, structures, railroad tracks and equipment, foundations, footings, materials, signs or signboards, debris, articles or other facilities which have been placed upon the Premises after the commencement of this Lease ("Improvements") located on, above or below the surface of the Premises. In addition, at any time during the term of this Lease, Lessee shall have the right to remove, at Lessee's sole cost and expense, all buildings, structures, railroad tracks and equipment, foundations, footings, materials, signs or signboards, debris, articles, or other facilities placed upon the Premises prior to the commencement of this Lease. Lessee agrees to return the Premises to Lessor in substantially the same condition as they existed on the commencement of this Lease subject to casualty losses occurring during the term hereof and subject to removal of improvements and other items pursuant to this Section 13.
In the event that either party elects to have improvements removed by Lessee, it is expressly understood by Lessee that until such time as the Premises are surrendered to Lessor free and clear of all Improvements, and the Premises are placed in the condition required by this Section 13, Lessee shall be liable to Lessor for such rental and additional rental, including taxes, at the rent as established in this Lease.
Furthermore, should Lessee fail to remove said property of Improvements required pursuant to this Section 13, Lessee hereby grants Lessor the absolute right to keep, convey, destroy, or otherwise dispose of the Improvements in any manner Lessor chooses, and in addition, Lessee agrees to pay any costs incurred by Lessor in doing so, within ten (10) days of receipt of Lessor's statement therefor.
The provisions of this Paragraph shall survive the termination of this Lease.
The parties to the Lease first specifically addressed the environmental contamination of the Property in the first amendment to the Lease which provided, in pertinent part:
Lessee shall, at its expense and not later than May 1, 1991, prepare and deliver to Lessor a corrective action plan to remediate soil and ground water contamination of the Premises. Such plan shall be prepared in accordance with...
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...the “court's goal is to give effect to the intention of the contracting parties.” Hoyt Street Properties, LLC v. Burlington N. & Santa Fe Ry. Co., 38 F.Supp.2d 1185, 1191 (D.Or.1999) (Ashmankas, J.) (citations omitted). Generally, under Oregon law, the construction of a contract “is a quest......