In this case, Wachovia Bank of North Carolina held a mortgage on environmentally contaminated property. The mortgage went into default and the bank foreclosed on the property, purchasing the property at the sheriff’s sale. The bank then sold the property to purchasers who later sued the bank since the property was contaminated. The Comprehensive Environmental Response, Compensation, and Liability Act provides that a seller of contaminated property must contribute to the cost of clean up. The purchasers argued that since the bank sold the contaminated property, the bank should pay for all or a portion of the cost of cleaning up an oil spill that occurred on the property. The court, however, held for the bank, finding

. . . the bank was the sole bidder at the foreclosure sale, then sold the property quickly and acted consistently in its role as a secured creditor trying to protect its security interest.

This important decision insulates lenders from liability under this environmental protection legislation as long as the lender does not manage or otherwise use the property and promptly sells it to another party.  U.S. v. Lamb (CA 4, No. 93-1184).

Author: Charles R. Harroun, Attorney at Law