State ex rel. Graeber v. Marion County Landfill, Inc., 88,646.

Citation76 P.3d 1000,276 Kan. 328
Decision Date19 September 2003
Docket NumberNo. 88,646.,88,646.
PartiesSTATE OF KANSAS ex rel. CLYDE D. GRAEBER, SECRETARY OF THE DEPARTMENT OF HEALTH AND ENVIRONMENT, Plaintiff/Appellee, v. MARION COUNTY LANDFILL, INC., Defendant/Appellee, and THE BOARD OF COUNTY COMMISSIONERS OF THE COUNTY OF MARION, KANSAS, Defendant/Appellant.
CourtKansas Supreme Court

J. Steven Pigg, of Fisher, Patterson, Sayler & Smith, L.L.P., of Topeka, argued the cause and was on the briefs for defendant/appellant.

Russell L. Mills, of Derby, argued the cause and was on the brief for defendant/appellee.

William L. Anderson, of Topeka, argued the cause and was on the brief for plaintiff/appellee.

The opinion of the court was delivered by

DAVIS, J.:

The Kansas Department of Health and Environment (KDHE) filed suit against Marion County Landfill, Inc., (MCLI) to enforce its administrative order which required MCLI to cease its landfill operation in Marion County and to perform closure and postclosure operations. The KDHE joined the Board of County Commissioners of the County of Marion, Kansas, (County) under alternative theories that the County was liable for the closure and postclosure operations by statute and as guarantor for MCLI's performance. The KDHE settled with MCLI and moved for summary judgment against the County, which the district court granted. The County appealed. We affirm in part, reverse in part, and remand for further proceedings.

Facts

Tom Grosse operated a landfill in Marion County, Kansas, located in the southwest quarter, section 14, township 20 south, range 3 east under KDHE permit 158 dated March 17, 1976. The original permit covered the entire quarter section, although Tom Grosse owned only the west 80 acres, the site of the actual landfill. His nephew, Jack Grosse, owned the east 80 acres of the quarter section. At the time the KDHE permit was granted, it was not necessary that the permit holder own the property upon which the landfill was to operate. The KDHE permit for operation of the landfill was personal and expired with the death of the holder.

Tom Grosse died June 11, 1993. His surviving spouse, Mary Lou Hoberecht, and his four children, William Grosse, Candice Green, Stephen Grosse, and William Grosse continued to operate the landfill without a permit. Together they formed a corporation, MCLI, on October 20, 1993. MCLI distributed 80 shares of its stock to Tom Grosse's heirs in exchange for the west 80-acre tract and four pieces of equipment essential to the operation of the landfill. Mary Lou received 40 shares and each of the children received 10 shares. On June 1, 1996, Mary Lou gave each of the children 10 shares, leaving the four children as the only shareholders, each with 20 shares. Following the death of Tom Grosse, MCLI applied for a temporary permit to operate the landfill and was eventually granted a temporary permit from the KDHE on June 11, 1996. MCLI operated the landfill from 1993 until it closed on October 9, 1996.

MCLI transferred the west 80 acres, with the exception of the 30 acres containing the landfill cells, to M.S.W., Inc., (MSW) a corporation operated by MCLI's attorney. Jack Grosse transferred the east 80 acres to the heirs of Tom Grosse, who subsequently transferred them to MSW.

Before Tom Grosse's death, the KDHE urged Marion County to support closure of the landfill. On February 10, 1992, Charles DeForest, chairperson of the County Commission, moved that the County "guarantee the closure of two or three acres as the operator, Tommy Grosse, has given a commitment to bring the closure up to date." The minutes further note that the "[County] will guarantee the closure of any additional acreage necessary." County Commission minutes reflect that Charles Linn of the KDHE "recommended a Letter of Resolution or guarantee from [the County] to commit funds to close the last acre or two; suggested that $7,500 would be sufficient." On February 13, 1992, DeForest sent a letter to the KDHE regarding the guaranty stating that "[t]he enclosed copies of the minutes of that meeting are intended to convey our guarantee that the landfill will meet [KDHE's] current closure and post closure fund regulations and allow for the landfill permit renewal."

Following Tom Grosse's death in 1993, Linn reported to the County that improvements needed to be made at the landfill and that the County needed to watch the landfill closer. Linn advised "that a commitment was needed from the County for closure funds," and "that the post closure and operation maintenance fund was Grosse's responsibility." That same year, William Grosse and Stephen Grosse, doing business as MCLI, filed a lawsuit against the County. The record does not indicate the nature of this action. However, the record does contain a journal entry, filed August 31, 1994, and approved by counsel for the parties, which provided:

"THEREUPON counsel for the Petitioners and the Respondent announce to the Court that they have agreed to dismiss this case without prejudice and that the parties have entered into a settlement of their differences such that the [County] shall be responsible for providing financial assurance for the closure of the Marion County Landfill and pay for post closure costs."

On February 7, 1994, the County was briefed by the KDHE on the regulations surrounding the operation of the landfill. The KDHE advised the County that after April 9, 1994, additional regulations would be imposed which the County should consider before continuing with its present site. The KDHE

"recommend[s] closing now if you find any problems that will cause problems later as corrective action is very costly and not feasible for small counties. The Operation Plan is 60% to 70% of operating costs. If landfill runs past April 9, 1994, you must be prepared to accept the financial costs for bonds to meet the financial costs or need to put money aside now."

The record does not contain specific information regarding the impact of the above regulations, but it is clear that the County was aware the continued operation of the landfill beyond April 9, 1994, would involve a substantial increase in cost.

Approximately 8 months later, on December 12, 1994, the County entered into an agreement with MCLI in order to extend the operation of the landfill until October 8, 1996. In order to satisfy the KDHE and assure the continued operation of the landfill, the County guaranteed closure and postclosure costs. MCLI agreed to accept the primary responsibility for the closure and postclosure costs. Among many other contractual provisions discussed below, the contract provided that any transfer of the landfill property would be subject to the County's rights under the contract. The evidence establishes that the KDHE would not have authorized the continued operation of the landfill without the County's guaranty.

Beginning in October 1995 and extending through June 1996, in a series of letters sent by the County to MCLI, the County claimed that MCLI had breached its contractual obligations to the County by failing to secure a permit from the KDHE for continued operation of the landfill and by attempting to transfer the landfill property to Browning-Ferris Industries of Kansas (BFI). Throughout this time, MCLI denied any breach of the contract.

On May 31, 1996, the County commissioners signed another separate written guaranty for the closure and postclosure procedures as required by the KDHE in the event MCLI could not perform those procedures. On September 30, 1996, the KDHE, in a letter sent to MCLI and the County, approved the County's guaranty agreement. On October 7, 1996, the County again claimed that it was no longer bound by its guarantee for the closure and postclosure of the landfill because MCLI breached its obligations under its December 12, 1994, agreement with the County, which entitled the County under its May 31, 1996, guaranty to cancel its guarantee. The County also claimed that MCLI's failure to comply with the preclosure requirements effectively relieved the County of its guaranty.

Herbert Bartel, County Zoning Administrator, explained in his deposition that the May 31, 1996, guaranty was made because the County needed a place to put its waste. Linda Peterson, commissioner and signatory of the guaranty, agreed in her deposition that the KDHE's permission to operate the landfill until October 9, 1996, was valuable consideration for the County's guaranty.

On June 11, 1996, the KDHE issued its order permitting MCLI to operate the landfill until October 9, 1996. The enforcement of this order forms the basis of the present lawsuit. The order required MCLI to perform clean-up and closure procedures. The KDHE ordered MCLI to submit a closure and postclosure plan that complied with statutes and regulations within 30 days of the order. Further, the KDHE ordered MCLI, its agents, or its assigns to implement the plan as approved by the KDHE. The KDHE ordered MCLI to file a restrictive covenant in a form approved by the KDHE.

MCLI filed the restrictive covenant on July 3, 1996. The covenant restricted the use of the west 80 acres to use as a landfill. The covenant required all future land uses to be "conducted in a manner which will protect and preserve the integrity of the environment and all waste containment and monitoring systems designed, installed, and operated during operation of the disposal areas or during the postclosure period," and required the KDHE's approval for all improvements to the property. The covenant granted the KDHE an easement to enter the property to perform work and monitoring of the closure plan. The covenant specified that any conveyance of the property must disclose all requirements of the long term care of the property. The covenant also specified that the terms would run with the land and bind any future party acquiring rights to the property.

On October 9, 1996, the landfill closed. William Grosse testified in his...

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