IOWA COMPREHENSIVE PETROLEUM v. Shell Oil

• Decision Date: 16 February 2000
• Docket Number: No. 99-1251.,99-1251.
• Citation: 606 N.W.2d 370
• Parties: IOWA COMPREHENSIVE PETROLEUM UNDERGROUND STORAGE TANK FUND BOARD, Appellant, v. SHELL OIL COMPANY, Appellee.
• Court: Iowa Supreme Court

606 N.W.2d 370

IOWA COMPREHENSIVE PETROLEUM UNDERGROUND STORAGE TANK FUND BOARD, Appellant, v. SHELL OIL COMPANY, Appellee.

No. 99-1251.

Supreme Court of Iowa.

February 16, 2000.

Thomas J. Miller, Attorney General, David R. Sheridan and David S. Steward, Assistant Attorneys General, and John R. Perkins of Pingel & Templer, P.C., West Des Moines, for appellant.

D. Patterson Gloor and Jennifer A. Keller of Cassiday, Schade & Gloor, Chicago, Illinois, Roger L. Lande and David Meloy of Stanley, Lande & Hunter, Muscatine, and Timothy J. Walker and Gary A. Norton of Whitfield & Eddy, P.L.C., Des Moines, for appellee.

Considered by McGIVERIN, C.J., CARTER, NEUMAN, and CADY, JJ., and HARRIS,¹ S.J.

CADY, Justice.

This appeal and cross-appeal concern the responsibility of a petroleum refiner and supplier under the Iowa Comprehensive Petroleum Underground Storage Tank Fund Act, Iowa Code chapter 455G (1997) (Tank Fund Act) for the clean up costs of petroleum released into the ground from an underground storage tank.

I. Background Facts and Proceedings.

Shell Oil Company began operating a gas station in DeWitt, Iowa in 1955. The station was located on a corner lot leased by Shell. The station sold gasoline and petroleum products under the Shell trademark. The gasoline was stored on the property in an underground storage tank, and dispensed by pumps to customers.

Shell entered into a sublease with an individual in 1962 to operate the Shell station. Shell continued to supply gasoline to the station, and placed it into the underground storage tank for sale by the sublessee. Shell replaced the tank in 1963 or 1964 after water was detected in the tank.

Shell assigned its lease to Jones County Oil Company in 1973, and the sublessee continued to operate the station under the Shell trademark. The station maintained the Shell trademark, and continued to sell Shell gasoline and products.

Jones County Oil Company was an independent distributor of Shell gasoline. As a Shell distributor or "jobber," Jones County Oil Company purchased gasoline exclusively from Shell and sold it to various Shell stations, including the Shell station in De-Witt.

Shortly after Shell assigned the lease to Jones County Oil Company, water was again discovered in the underground tank. After consulting with Shell, the tank was relined.

Jones County Oil Company purchased the station in 1981, and it continued to be operated under the Shell trademark. The property was purchased by an individual in 1983 after Jones County Oil Company suffered financial problems.

Casey's General Store purchased the land in 1985. It razed the station building and removed the underground storage tank to rebuild a convenience store and gasoline station to meet its distinctive design and needs. When the underground storage tank system was removed, gasoline was observed in the underground pit and a strong odor of petroleum was detected in the soil. The odor became stronger as the new pit was dug deeper.

Casey's reported the contamination to the Iowa Department of Natural Resources, and applied to the Iowa Comprehensive Petroleum Underground Storage Tank Fund Board for benefits under the Tank Fund Act. The Board approved Casey's claim. A total of $27,335.09 was paid in corrective action costs.

The Board brought this action against Shell under the Tank Fund Act to recover the costs of the corrective action. It claimed Shell was an "operator" of the underground storage tank system until 1985 and was liable for the petroleum contamination discovered by Casey's.

At trial, the district court instructed the jury on the elements of recovery. It instructed the jury that an "operator" was a person or entity "in control of, or having responsibility for, the daily operation of the underground storage tank system." The district court also instructed the jury that the Board was required to prove that the petroleum release was a proximate cause of the corrective action costs. The jury was further instructed the Board was required to prove the reasonableness of its corrective action costs.

The jury found Shell was an operator from 1962 to 1973, but determined it did not operate the site after it assigned the lease to the Shell distributor in 1973. The jury awarded the Board the full past corrective action costs of $27,355.09, and $1000 for future corrective action costs. The Board had sought $190,000 for future corrective action costs from Shell. The trial court denied Shell's motion for judgment notwithstanding the verdict.

The Board appealed and Shell cross-appealed. The Board claims the district court erred in instructing the jury on the definition of an operator. It also claims the court erred by including proximate causation as an element of recovery and in requiring the Board to prove the reasonableness of the corrective costs. On cross-appeal, Shell claims that its involvement at the site did not fall within the scope of the Tank Fund Act, and that the Tank Fund Act does not apply retroactively.

II. Scope of Review.

We review a challenge to jury instructions for errors of law. Iowa R.App. P. 4; Sheets v. Ritt, Ritt & Ritt, Inc., 581 N.W.2d 602, 604 (Iowa 1998). Error in giving or refusing jury instructions, without prejudice to the complaining party, does not merit reversal. Thavenet v. Davis, 589 N.W.2d 233, 236 (Iowa 1999).

We review the district court's ruling on the motion for judgment notwithstanding the verdict on error. Iowa R.App. P. 4; Roling v. Daily, 596 N.W.2d 72, 74 (Iowa 1999). We question whether the evidence, when viewed in the light most favorable to the non-moving party, was sufficient to generate a question for the jury. Id.

III. Background of Tank Fund Act.

We have considered the background of the Tank Fund Act in other cases. See Iowa Comprehensive Petroleum Underground Storage Tank Fund Bd. v. Mobil Oil Corp., 606 N.W.2d 359 (Iowa 2000) (Mobil I); Hagen v. Texaco Ref. & Mktg., Inc., 526 N.W.2d 531, 535 (Iowa 1995). In particular, the Tank Fund Act established the Iowa Comprehensive Petroleum Underground Tank Storage Fund which is administered by the Board. Iowa Code §§ 455G.3, .4. This fund assists owners and operators of underground storage tanks in complying with federal technical and financial responsibility regulations, and helps protect and improve the quality of Iowa's environment. Id. § 455G.3(2); see 1989 Iowa Acts ch. 131, § 2. One method by which the fund assists owners and operators and protects the environment is to help finance corrective actions once the petroleum release is discovered. Id. § 455G.9. The Board is empowered to recover funds spent on corrective action. In general, the Board recovers the costs of the corrective action from the "owner, operator, or other potentially responsible party." Id. § 455G.13(1).

IV. Jury Instructions.

A. Operator and Proximate Cause.

The Board first claims the definition of an "operator" under the Tank Fund Act should not only include those having "control of" or "responsibility for" the underground storage tank, but the ability to control the underground storage tank. Thus, it claims Shell remained an "operator" of the underground storage tank after it assigned its lease in 1973 because it retained the ability to control the operation of the underground storage tank by refusing to sell Shell gasoline to the Shell jobber for distribution to the dealer, and retained the right to debrand the station. The Board further claims proximate causation is not required in an action against an owner or operator.

We have recently addressed both issues in Iowa Comprehensive Petroleum Underground Storage Tank Fund Board v. Mobil Oil Corp., 606 N.W.2d 359 (Iowa 2000) (Mobil I) (defining "operator"), and Iowa Comprehensive Petroleum Underground Storage Tank Fund Board v. Shell Oil Co., 606 N.W.2d 376 (Iowa 2000) (Shell II) (imposing proximate cause requirement). Based on the same reasoning set forth in those opinions, we conclude the district court did not err in instructing the jury on the definition of an operator or in imposing a proximate cause requirement.

B. Proof of Reasonableness of Costs.

The district court instructed the jury that the Board was required to prove the reasonableness of the corrective action costs. The Board alleges that a presumption of reasonableness should attach to any corrective action expenditures under the Tank Fund Act and Shell should have the burden to prove any expenditures or estimates were unreasonable, arbitrary, or capricious.

The Board correctly points out that it is required to determine the reasonableness of the corrective action costs before making payment. See Iowa Code § 455G.12(a). Additionally, all contracts to clean up petroleum releases are subject to public bidding requirements. See id. §§ 455G.4(4), .5. This helps ensure that those required to pay for the work are given the best possible performance at the lowest price. See Weiss v. Incorporated Town of Woodbine, 228 Iowa 1, 11, 289 N.W. 469, 474 (1940) ("competitive bidding is required to obtain contracts at the most reasonable, economical and practical cost in having the work economically done"). Furthermore, there is a recognized presumption, absent evidence to the contrary, that public officials will carry out their duties in a prudent, proper manner. See Janson v. Fulton, 162 N.W.2d 438, 442 (Iowa 1968).

Nevertheless, we do not believe the Board's obligation to enter into fair and equitable contracts at usual and customary rates necessarily impacts the burden of proof in a subsequent action by the Board to recover costs from a responsible party. It is fundamental to our legal system that the burden of proof in an action ordinarily rests with the party who is seeking recovery. Verschoor v. Miller, 259 Iowa 170, 175, 143 N.W.2d 385, 388 (1966); see also Iowa R.App. P. 14(f)(5). This principle is consistent with the notion that the burden should normally rest with the party who has the greater...