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January 19, 1994

TEXACO INC., a Delaware Corporation, Defendant.


The opinion of the court was delivered by: EDWARD A. INFANTE


 In this action property owners Michael and Maria Mortkowitz allege that their former tenant, Texaco, Inc. caused serious gasoline fuel contamination to their property while maintaining and operating a gasoline station on the property. Defendant seeks partial summary judgment as to seven of Plaintiffs' nine claims primarily on the grounds that the claims are barred by the applicable statutes of limitations. *fn1"

 The motion was heard on December 13, 1993. Dana McRae, Esq., of McCutchen, Doyle, Brown & Enersen appeared on behalf of Defendant Texaco. Henry Mariani, Esq. appeared on behalf of Plaintiffs Michael and Maria Mortkowitz. Having considered the motion, opposition, and reply papers, and the comments of counsel, Defendant's motion for partial summary judgment is GRANTED IN PART and DENIED IN PART as set forth below.


 The property which is the subject of this action is located at 1990 Los Gatos-Almaden Blvd., San Jose, California. It was leased to Texaco by the former property owners, Mario and Grace Canavero from July 1, 1956 through April of 1983. The lease, drafted and prepared by Texaco, provided in relevant part that the Canaveros would build a gasoline service station on the property for Texaco's use. The lease also provided that Texaco would furnish and retain title to, and the Canaveros would install gasoline pumps, two 4,000 gallon underground tanks, one 2,000 gallon underground tank, one 550 gallon waste oil tank, gallon lubricating outfits, and waste oil tanks. On May 1, 1967, Texaco and the Canaveros entered into a modification of the lease which provided that the Canaveros would modernize the service station, replace some but not all of the underground tanks, and install two additional tanks and associated piping.

 In 1977, Plaintiffs purchased the property from the Canaveros subject to the Texaco lease. Thereafter, Texaco continued to operate a gasoline station on the property. Prior to the expiration of the lease, Texaco notified Plaintiffs of its intention to exercise its option to purchase the property. However, Texaco did not purchase the property and instead sold its equipment on the property to Plaintiffs on May 17, 1983. The Bill of Sale for the tanks provided in pertinent part:

Texaco Inc., in the execution of this Bill of Sale, does not represent that said tanks are in repair or in good condition and these tanks are sold in the condition which they are in at the present time with-out any representation as to what that condition may be . . . Those items described above as "used" are sold "as is." THERE ARE NO WARRANTIES WHICH EXTEND BEYOND THE FOREGOING DESCRIPTION OF THE PROPERTY.

 For the next six years Plaintiffs leased the property to various tenants who also operated the gasoline service station.

 On July 1, 1983, more than a month after Plaintiffs purchased the underground tanks, the Hazardous Materials Storage Ordinance, San Jose Municipal Code, Title 17, chapter 17.68 (the "HMSO"), became effective, and required owners of underground "storage facilities," defined to include tanks and "pipes," to outfit the facility with a monitoring system capable of detecting unauthorized releases of any hazardous substances, including gasoline, stored in the facility. In 1983, the California Legislature enacted a similar law requiring owners to outfit their underground tank systems, including "connecting piping," with a monitoring system capable of detecting unauthorized releases of any hazardous substances stored in the tank by July 1, 1985. California Health and Safety Code ยง 25292(a).

 On November 1, 1988, Plaintiffs received a bona fide offer to purchase the property from Village Properties. During the buyer's investigation of the premises, Plaintiffs became aware of the existence and requirements of the San Jose HMSO. The buyer withdrew from the sale after testing disclosed that one of the underground storage tanks was in failure mode.

 Plaintiffs later hired an engineering contractor to remove the underground fuel tanks. On April 11, 1989, five drained and emptied underground fuel tanks were removed from the property. Captain John Castro, Jr. of the San Jose Fire Department was present at the removal of the tanks, and testified at his deposition that he examined the tanks and did not find any evidence of any holes or cracks in the tanks or any evidence that there had been any leakage from the tanks. However, it was discovered that a loose pipe union in the piping system leading to the tanks had been leaking. As a result of the fuel leak, the Santa Clara Valley Water District (the "SCVWD"), the local agency in charge of investigation and remediation at fuel leak sites, required Plaintiffs to clean up the contamination on the property at their own cost and expense.

 By letter dated March 29, 1990, Plaintiffs informed Texaco of the contamination on the property. Having received no response, Plaintiffs filed an action against Texaco regarding the contamination on the property on April 13, 1990.

 During the course of discovery, Texaco produced documents to Plaintiffs which indicated that one of Texaco's station operators, Yaghaub Halelouyan, did not maintain gasoline inventory records from at least July 30, 1980 through April 8, 1983. Texaco also produced documents indicating that on July 11, 1980, a Texaco corrosion engineer/consultant named Warren Rogers prepared a report on the condition of Texaco's Cathodic protection system on the property. *fn2" Texaco also produced documents indicating that in 1982, Mr. Rogers also prepared, at Texaco's request, a report on the condition of the underground tank system and the probabilities that the tanks were leaking.

 On October 5, 1992, the parties stipulated to the filing of Plaintiffs' First Amended Complaint. The Amended Complaint contains nine claims for relief: breach of contract; negligence; public nuisance; private nuisance; trespass; strict liability for an ultrahazardous activity; indemnification and declaratory relief; declaratory relief under federal law regarding liability; and fraud. Defendant asserts that it is entitled to summary judgment as to all of Plaintiffs' claims for relief except those for indemnification and declaratory relief.


 Rule 56(c), Fed.R.Civ.P., provides that summary judgment shall be entered against the non-moving party if:

the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law.

 The test to determine whether a motion for summary judgment should be granted "mirrors" that applied to a motion for a directed verdict:

The trial judge must direct the verdict if, under governing law, there can be but one reasonable conclusion as to the verdict.

 Id. at 250. Accordingly, in reversing a denial of summary judgment, the Supreme Court ruled:

Where the record taken as a whole could not lead a rational trier of fact to find for the non-moving party, there is no "genuine issue for trial" under Rule 56(c).

 Matsushita Electric Industrial Co. v. Zenith Radio Corp., 475 U.S. 574, 587, 106 S. Ct. 1348, 89 L. Ed. 2d 538 (1986).

 The burden of establishing the nonexistence of a "genuine issue as to any material fact" is initially on the party moving for summary judgment. Celotex Corp. v. Catrett, 477 U.S. 317, 106 S. Ct. 2548, 91 L. Ed. 2d 265 (1986). The moving party's burden of demonstrating that it is entitled to judgment as a matter of law may be satisfied by showing that ...

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