Title: McKone v. Guertzgen

State: wyoming

Issuer: Wyoming Supreme Court

Document:

McKone v. Guertzgen1991 WY 81811 P.2d 728Case Number: 90-247Decided: 05/23/1991Supreme Court of Wyoming
Robert O. McKONE, 
Appellant (Defendant),

v.

Melvin GUERTZGEN and 
Claudia Guertzgen, husband and wife, Appellees (Plaintiffs).

Appeal from The District 
Court, Hot SpringsCounty, Gary P. Hartman, 
J.

William R. Shelledy, Jr. 
of Scott, Shelledy and Luhm, Worland, for appellant.

Steven R. Helling and 
Bruce N. Willoughby of Murane & Bostwick, Casper, for appellees.

Before URBIGKIT, C.J., 
and THOMAS, CARDINE, MACY and GOLDEN, JJ.

CARDINE, Justice.

[¶1.]     McKone, the vendor of 
real property under an executory contract for deed, appeals the district court's 
order that he is the one responsible for the removal of the abandoned 
underground storage tanks located on the property.

[¶2.]     We affirm.

[¶3.]     McKone raises the 
following issues:

"1. Whether the District 
Court erred when it looked beyond the Contract for Deed to determine the 
responsibilities of the parties as to Fire Marshal's request to remove 
underground fuel storage tanks?

"2. Whether the District 
Court erred when it looked beyond the Contract for Deed and the Fire Code to 
determine the responsibilities of the parties as to the Fire Marshal's request 
to remove underground fuel storage tanks?

"3. Whether the District 
Court erred when it relied upon Olds v. Little Horse [Creek] Cattle Co., as 
authority when it determined the responsibilities of the parties as to the Fire 
Marshal's request to remove underground fuel storage tanks?

"4. Whether Olds v. 
Little Horse [Creek] Cattle Co., 140 P. 1004, 22 Wyo. 336 (1914) should be 
overruled if it is determinative of the responsibilities of parties as to 
contracts for deed between individuals?"

[¶4.]     In 1981, McKone agreed 
to sell real property located in the Town of Thermopolis to the Guertzgens. The parties 
drafted their agreement in the form of a contract for deed (also known as an 
installment land contract). It provided, inter alia, that the Guertzgens would 
have possession of the property, but that the warranty deed would remain in 
escrow until all the payments had been made under the contract. The final 
payment was scheduled for June 15, 1991.

[¶5.]     The Guertzgens 
converted the property, formerly a service station, into a liquor store/lounge. 
In 1989, after the Guertzgens had made substantial payments under the agreement, 
the Chief of the Thermopolis Fire Department ordered the removal of the 
property's underground fuel tanks because they violated the Uniform Fire Code. 
The tanks were not in use when the Guertzgens took possession of the property in 
1981. The Guertzgens argued that McKone should pay for the removal of the tanks 
because, legally, he is still the owner of the property (the warranty deed 
remains in escrow until the full amount of the purchase price has been 
paid).

[¶6.]     The parties submitted 
memoranda and exhibits, along with a set of stipulated facts, to the district 
court which ruled that McKone was the legal owner of the property and 
responsible for the removal of the tanks. We stated in True v. Hi-Plains 
Elevator Machinery, Inc., 577 P.2d 991, 996 (Wyo. 1978), that a district court's 
"general finding and judgment for the successful party carries with it every 
finding of fact which can reasonably and fairly be drawn from the 
evidence."

[¶7.]     McKone contends that 
the provisions in the parties' agreement for repair and risk of loss impose the 
responsibility for the removal of the tanks upon the Guertzgens. Neither of 
these provisions, however, address this particular contingency. Thus, we look 
elsewhere to determine the responsibility for the removal of the 
tanks.

[¶8.]     McKone also believes 
the Uniform Fire Code (1988 ed.) (Code) holds the Guertzgens responsible for the 
removal of the tanks. McKone argues that the Guertzgens "best fit the Code's 
definition" of the person responsible for the abandoned tanks. He bases his 
argument on the Code requirement, found in § 3.102, that the "owner, operator, 
occupant or other person responsible for the condition or violation" must comply 
with the orders and notices issued by the fire marshall. McKone cites the Code's definition of 
owner, which "includes his duly authorized agent or attorney, a purchaser, 
devisee, fiduciary and a person having vested or contingent interest in the 
property in question" to conclude that the Guertzgens are the ones responsible 
for the removal of the tanks.

[¶9.]     In Matter of Estate of 
Ventling, 771 P.2d 388, 389 (Wyo. 1989), we acknowledged that the purchaser 
under a contract for deed has an "equitable interest" in the property. Thus, we 
agree that the Guertzgens fit the Code's definition of owner because their 
equitable interest in the property is also a contingent interest, which the Code 
includes under the definition of owner. McKone, however, also fits the 
definition of owner. The parties' agreement provides that the warranty deed 
remains in escrow until the Guertzgens have made all the payments under the 
agreement and the warranty deed is conveyed to them.

[¶10.]  Professor Rudolph has summarized the 
legal principles of the contract for deed:

"The contract [for deed] 
typically provides for the payment of the purchase price in installments over a 
period of years and for retention of title in the seller until the purchase 
price is fully paid, but gives the buyer a right to possession from the 
execution of the contract." Rudolph, E. George, The Wyoming Law of Real 
Mortgages, pp. 147-48 (1969).

See Matter of Estate of 
Ventling, 771 P.2d  at 389, wherein we stated: "At all times prior to the final 
payment and the delivery of the deed, even though the buyer usually has 
possession, legal title remains vested in the seller." Until there has been a 
conveyance of the warranty deed, McKone continues to hold legal title and 
remains the legal owner of the property.

[¶11.]  Because both the Guertzgens and McKone 
fall within the Code's definition of owner, we focus on the language "or other 
person responsible for the condition or violation" found in § 3.102 to determine 
who is responsible for the removal of the tanks. This language requires that - 
in addition to being the owner, operator, or occupant of the property - one must 
also be the person responsible for the condition or violation. Thus, who owned 
the property when the tanks were abandoned is an important factor in fixing the 
liability for their removal.

[¶12.]  In a confusingly worded stipulation, the 
Guertzgens and McKone agreed "[t]hat prior to May 9, 1981 [the date of the 
agreement for warranty deed], the underground storage tanks had been 
decommissioned by a prior Contract for Deed person, not the the [sic] Plaintiffs 
or the Defendant, and have not been in use since that time." We interpret this 
stipulation to mean that McKone was the vendor of the same property when the 
tanks were abandoned under a previous contract for deed. It may be that the 
person most responsible for the abandonment of the tanks (the previous purchaser 
under contract for deed) is not a party to this action. Nonetheless, given the 
facts and the parties now before us, we hold that McKone is the party 
responsible for the removal of the tanks because he was the owner of the 
property when they were abandoned.

[¶13.]  The Code supports the district court's 
general finding and judgment in favor of the Guertzgens; and accordingly, we do 
not address the other issues raised by McKone.

URBIGKIT, 
C.J., 
and GOLDEN, J., dissent with opinion. 

URBIGKIT, Chief Justice, 
dissenting.

[¶14.]  When Robert O. McKone entered into a 
transaction with Melvin Guertzgen and Claudia Guertzgen to sell a business lot 
in Thermopolis, Wyoming on May 9, 1981, none of them expected that abandoned 
underground petroleum product storage tanks would come back to haunt both the 
seller and the buyers. Events change rapidly in this society in which we live 
and society came back to them to look with disdain, suspicion and active 
antagonism upon the abandoned underground petroleum product storage 
tanks.

[¶15.]  The buyers bought the property "as is, 
where is."1 Unfortunately, in acceptance of an 
invalid legend of the advantages of the escrow deed arrangement for an 
installment contract of sale (probably to avoid classical foreclosure upon 
default), the parties were faced with events occurring since sale which have 
severely impacted the property's value - abandoned underground petroleum product 
storage tanks.2

[¶16.]  The buyers paid promptly and properly on 
the installment contract for about eight years until notice by the fire 
marshall of 
current law changes and regulations regarding abandoned underground petroleum 
product storage tanks. State and federal laws were enacted and state and federal 
administrative agencies were empowered. Hundreds of thousands of old filling 
station site abandoned underground petroleum product storage tanks became a 
heavy problem which not only surfaced, but explosively mushroomed. See the most 
recent text of the Water Pollution from Underground Storage Tanks Corrective 
Action Act of 1990, Wyo. Sess. Laws ch. 98 (1990), W.S. 35-11-1414 through 
35-11-1428 (Cum.Supp. 1990). See also the Comprehensive Environmental Response, 
Compensation, and Liability Act of 1980, 42 U.S.C. § 9611 (1988) and the 
Resource Conservation and Recovery Act of 1976, 42 U.S.C. § 6901 (1988). See, 
generally, the Wyoming Environmental Quality Act, W.S. 35-11-101 through 
35-11-403, 35-11-405, 35-11-406, 35-11-408 through 35-11-1104 and 35-11-1414 
through 35-11-1428 (Cum. Supp. 1990).

[¶17.]  We are now faced in this appeal with 
society's imposition of an expensive cost upon the landowner and are asked who 
is to pay - the seller or the buyers? I would really like to believe that some 
part of the responsibility should be placed upon whoever advised these parties 
to use the installment sale technique instead of a note and mortgage, but those 
other parties are not here before us. We have a seller, buyers and an imposed 
cost by the government.

[¶18.]  This majority now assesses responsibility 
on the seller within an incomplete record which does not accurately advise when 
the filling station usage was discontinued or necessarily who owned the property 
at that time.

     1. That prior to May 
9, 1981, the underground storage tanks had been decommissioned by a prior 
Contract for Deed person, not the * * * Plaintiffs or the Defendant, and have 
not been in use since that time.

[¶19.]  I dissent in disinclination to continue 
the fiction of ownership derived from the antiquated differentiation between a 
note and mortgage security interest and the installment sale contract as another 
real estate purchase price security device. I would just abandon the 
artificiality of the fiction, no matter how long matured in legal dialogue.3

[¶20.]  Except for the frequently misunderstood 
criteria for foreclosure upon payment default, only remanents of archaic and 
outdated concepts of law survive to distinguish the ownership of land held 
subject to note and mortgage or by escrow deed and installment contract. Olds v. 
Little Horse Creek Cattle Co., 22 Wyo. 336, 140 P. 1004 (1914) served a different purpose in historical Wyoming law and I would 
not now expand that case to create a continued fiction to provide a difference 
in actual rights of ownership where, in practical fact, none actually 
continue.

[¶21.]  It is appreciated that this majority 
supports its conclusion by accurate and long-standing legal concepts. My 
difference is that we should now abandon those fictions derived from times long 
past and economic relationships long gone. For current review with legislative 
change, see Kershen, Contracts for Deed in Oklahoma: Obsolete, But Not Forgotten, 15 Okla. City U.L.Rev. 715 
(1990).

[¶22.]  For this case, I would hold that the 
buyers, by their agreement, bought problems of future governmental action with 
land purchased in specific accord with the "as is, where is" provisions of the 
written agreement. I would reverse the district court's judgment in impression 
upon the seller of the obligation to succor the buyers from governmental 
required tank removal. Further, I would determine that the unknown and 
unforeseen go with the risk of purchase and do not remain with the equity of 
retained sale price obligation. The owner of the premises should be the 
possessor with rights to the property, not the holder of a security device for 
purchase payment.

[¶23.]  Additionally, I have a problem fitting in 
the abandoned tank removal issue with the injunction requested in complaint and 
the tank removal declaratory judgment granted in disposition. I do not know 
where the parties will go from here since the litigation started with a request 
for an injunction to forestall foreclosure upon non-payment of installment 
payments. Perhaps by now someone has removed the tanks, no leakage has 
previously occurred and a dollar amount can be determined. If not, I lack 
assurance what will happen next or even if the state contribution for tank 
removal pursuant to W.S. 35-11-1424 (Cum. Supp. 1990) is a possibility. It 
certainly is a possibility that the tanks have leaked and that the clean up 
costs could substantially exceed the value of the real estate and certainly 
exceed the amount remaining payable on the purchase price security 
instrument.

[¶24.]  Unless society would contribute, I would 
leave the problem with the present property owners, and consequently dissent to 
this majority's decision to the contrary.

FOOTNOTES

1 Meaning in real estate 
trade terms a characterization of the agreement that the identified property and 
improvements were sold without warranty of fitness or quality except as done 
here and provided normally to warrant title. The only actual warranty provided 
here by seller in sales documents was for title which was covered by a mandatory 
examination and objection abstract review process. "Buyer shall advise Seller of 
any defects in title within [two weeks] * * *." The provision of the agreement 
placed total responsibility upon buyer for maintenance of the real property and 
improvements, remodeling and reconstruction, with payments to include all taxes 
levied and assessed against the real property after the year of sale. The term 
"as is" means the property is sold without warranty and "where is" defines the 
identity and possible problems. This property was a known closed filling 
station. Wolford v. Freeman, 150 Neb. 537, 35 N.W.2d 98 (1948); Montague v. Bank for Savings in City of New York, 181 Misc. 863, 
43 N.Y.S.2d 321 (1943). See also an affirmative use of an "as is" clause in the 
Uniform Commercial Code, W.S. 34.1-2-316(c)(i).

2 Knowledgeable attorneys 
experienced in real estate and a few experienced realtors should know that a 
deed and mortgage is a preferable land sale security device, with exception in 
some very limited circumstances, but almost never as an exception if the payment 
is long term. See Nelson and Whitman, The InstallmentLand Contract - A National Viewpoint, 1977 
B.Y.U.L.Rev. 541 (1977).

3 See the discussion of 
archaic and inappropriate feudalistic principles of real estate law discussed in 
Simpson v. Kistler Inv. Co., 713 P.2d 751 (Wyo. 1986).

GOLDEN, Justice, 
dissenting

[¶25.]  I respectfully dissent. When resolving 
this sort of dispute this court looks first to the parties' agreement. If the 
writing is unambiguous it expresses and controls the parties' assignment of 
rights and obligations. Narans v. Paulsen, 803 P.2d 358, 362 (Wyo. 1990). I believe we 
need go no farther than the language of the written agreement to decide this 
case.

[¶26.]  The majority applies this principle, but 
finds the provisions asserted by McKone do not address this particular 
contingency, and looks beyond the agreement language to determine liability for 
the cost of removing the abandoned tanks. In his dissent Chief Justice Urbigkit 
also looks to the agreement and resolves the issue to his satisfaction by 
applying "as is, where is" provisions of the written agreement. 

[¶27.]  I agree with the majority that the 
provisions McKone relies on do not allocate the burden of removal costs, but do 
note they evidence the intent of the parties that the Guertzgens would shoulder 
all responsibilities connected with the property when they assumed possession. I 
cannot identify an "as is, where is" provision, but I find that another 
agreement term does assign responsibility for removing the tanks in a manner 
consistent with the delegations in the provisions offered by McKone. As we 
consider the writing as a whole when establishing the intent of the parties, the 
consistency of all these provisions is significant. True Oil Co. v. Sinclair Oil 
Corp., 771 P.2d 781, 790 (Wyo. 1989).

[¶28.]  We are not concerned here so much with 
allocation of risk of loss as we are with determination of which party is 
responsible for compliance with laws. The agreement assigns this responsibility 
to the Guertzgens where it states that buyer agrees to purchase and take the 
property

SUBJECT TO easements, 
reservations and restrictions of record and to Zoning and other laws. 
(emphasis added).

The Guertzgens took 
possession subject to laws, and by doing so assumed the obligation of compliance 
with them.1 This reading is consistent with the 
other provisions of the parties' agreement. Logically, the Guertzgens' 
possession is subject to laws existing when the agreement was entered and any 
since enacted. Consequently, the Guertzgens, and not McKone, must bear the 
financial burden of compliance with laws affecting this property.

[¶29.]  I would reverse the decision of the trial 
court.

FOOTNOTES

1 
There is no evidence of any warranty by seller that the property was in 
compliance with applicable laws and regulations at the time the agreement was 
signed.