# FILED

June 2, 1999 Cecil Crowson, Jr. Appellate Cou rt Clerk IN THE COURT OF APPEALS OF TENNESSEE AT NASHVILLE

STONE FORT LAND COMPANY, ) ) Petitioner/Appell

ant, ) Davidson Chancery No. 95-136-III

) v. ) ) Appeal No. 01A01-9707-CH-00370 THE TENNESSEE PETROLEUM ) UNDERGROUND STORAGE TANK ) BOARD, and JUSTIN P. WILSON, ) COMMISSIONER OF THE ) DEPARTMENT OF ENVIRONMENT ) AND CONVERSATION, ) ) Respondents/Appe

llees. )

APPEAL FROM THE CHANCERY COURT OF DAVIDSON COUNTY

AT NASHVILLE, TENNESSEE

THE HONORABLE ELLEN HOBBS LYLE, CHANCELLOR

For the Petitioner/Appellant : For the Respondents/Appellees : C. Crews Townsend John Knox Walkup Brian E. Humphrey Elizabeth P. McCarter Chattanooga, Tennessee Nashville, Tennessee

AFFIRMED

HOLLY KIRBY LILL

ARD, J.

CONCUR:

W. FRANK CRAWFORD, P.J., W.S.

DAVID R. FARMER, J.OPINION

This case involves eligibility for environmental cleanup funds. The plaintiff landowner appeals the decision of the Tennessee P etrol eum Underground Tank Board finding the plaintiff ineligible to receive reimbursement from the petroleum underground storage tank fund established in Tennessee Code An n otated § 68-215-110. Upon initial review in chancery court, the Board’s decision was reversed. T he trial court sub sequently reconsidered its decision and, based on recent Tennessee appe

llate decisions, a

ffirmed the Boar

d’s decision to den

y assistance. We

affirm. Stone Fort Land Company (“Stone Fort”) owns propert y located at 44 00 Amnicola Highway, Chattanooga, Tennessee (the “Property”). In 1968, pursuant to a l ong-term lease, Stone Fort constructed

for the lessee a building and other improvements on the Property, including a 500-gallon underground

storage tank (“UST”) for the storage of used oil. In 1975, Stone Fort installed a second 500-gallon UST on the Property. In 1988, the Tennessee Petroleum Underground Storage Tank Act (the “Act”) took

effect. The Act required that all USTs in use as of July 1, 1988, be registered within one year, by June 30, 1989. Tenn. Code Ann. § 68-215-106(a)(1) (1996). Owners and oper ators of USTs are

required to pay an annual fee for each US T. Tenn. Code Ann. § 68-215-109(a) (1996). In addition, the Act established the Petroleum Underground Storage Tank Fund (the “Fund”). Tenn. Code Ann. § 68- 215-1 10( a) (1996). The Fund is available to reimburse property owners for expenditures for “the reasonable

and safe cleanup” of petroleum sites within the state. Tenn. Code Ann. § 68-215-111(a) (1996). Pursuant to the Act, the Tennessee Petroleum Underground Storage Tank Board (the “Boa rd”) promulgated rules addressing “Fund Eligibility Requirement s” and “Loss, Restoration, an d Establishment of Fund Eligibility.” Tenn. Comp. R. & Regs. tit. 14, ch. 1200-1-15-.09(4)(a)-(5)(a) (1998). Stone Fort did not register the two USTs by the required date, nor did it pay the mandated fees. In 1991, Stone Fort sought to refinance a loan secured by several of the company’s pro perties, including the Pr operty at issue. A prospective lender hired Geological and Environmental Services , Inc. (“Environmental Services”) to conduct a review of the Property. Environmental2

Services discovered the existence of the USTs on the property and learned that the USTs were not registered as required by the Act. On September 13, 1991, Stone Fort submitted the ne cessary forms and fees to the Division of Underg rou nd Storage Tanks (the “Division”) of the Department of Environment and Conservation to register the USTs and pay the late annual fees. In October 1991, Environmental Services perform ed a n environmental assessment of the Proper ty. The assessment re vealed elevate

d levels of petrol

eum hydrocarbon

s in the soil. As a result, Stone Fort removed the US Ts and remediated the soil contamination. Subsequently, on November

19, 1992, Stone Fort submitted a request to the Division for reimbursement from the Fund for its expenditures to clean up the contaminated soil. On April 8, 1993, the Division denied Stone Fort’s request, finding that Stone Fort had never established eligibility for Fund reimbursement. The Division advised Sto

ne Fort that, in

order to become F

und eligible, it

must comply with the Rules by (1) insuring that all storage tanks were properly registered; (2) insuring that all current and past due fees and late charges were paid; (3) conducting a site check with clean soil sample results. The third requirement,

the clean soil sample, was at the time an internal policy of the Division, referred to as the Site Check Policy. The Site Check Policy required owners to conduct soil sample tests, and sample results were req

uired to be below stated levels of contamination. Stone Fort was not info rmed by the Division of the Site Check Policy before Stone Fort submitted its application fo r reimbursement. Stone Fort then sought a

hearing before the

Board. The contested hearing before the Board

was conducted on September 21, 1994. The Board decided to permit Stone Fort to seek reimbursement from the Fund, despite the fact that Stone Fort had failed to comply with the Fund eligibility requirements. The Board allo wed Stone Fort to seek reimbursement because it made a good faith effort to c

omply with the eligib

ility requirement

s and the Division’s failure to notify Stone Fort of the Site Check Policy before Stone Fort submitted its application for reimbursement. After the Board’s decision, pursua nt to Tennessee Code Annotated § 4-5-322(a)(2), the Tennessee Department of Environment and Conservation (“the Department”) filed a Petition for Judicial Review with the Davidson Count y Chancery Court. On October 4, 1995, the trial court remanded the matter

to the Board for clarification of the reasons for its decision, noting that Stone Fort had not complied with the Act or the Rules. On remand and after another hearing, the Board reversed its initial decision. It fou nd that3

Stone Fort was ineligible for Fund assistance b ecau se it failed to register the USTs and pay the required annual fees. Stone Fort then sought judicial review of the Board’s decision, pursuant to Tennessee Code Annotated § 4-5-3 22 (h). This statute provides: The court may reverse or modify the decision if the rights of the petitioner have been prejudiced

because the adm

inistrative findin

gs, inferences, conclusions or decisions are: (1) In violation of

constitutional or st

atutory provisions ; (2) In excess of the statutory authority of the agency; (3) Made upon unlawful procedure; (4) Arbitrary or capricious or char acterized by abuse of discr etion or clearly unwarranted exercise of discretion; or (5) Unsupported by ev

idence which is bo

th substantial and material in the light of the entire record. Tenn. Code Ann. § 4-5-322(h)(1)-(5) (1996). After a hearing, the trial court reversed the Board’s decision. The trial court noted that it was undisputed that registration of the USTs and payment of the annual fee s, t hough not timely, occurred before the contamination of the soil was discovered. It observed that there was no allegation that the tardy registration and payment of fees was motivated by knowledge or suspicion that it w ould have to

conduct an environmental cleanup of the Property. The trial court found that th e Act did not give th

e Board authority

to restrict Fund ac

cess to property

owners who had timely registered and paid the require d fees. Thu s, under Tennessee Code Annotated § 4-5-322(h), the trial court concluded that the Board’s decision to deny Stone Fort Fund eligibility was “in violation of statutory provisions.” Tenn. Code Ann. § 4-5-322(h)(1) (1996). T he Board th en filed a motion to reconsider, citing this Court’s decisions in Christian v. Tennessee Petroleum Underground Storage Tank B d , No . 01A01-9410-CH-00489, 1995 WL 241331 (Tenn. App. April 26, 1995) (Christian I) and Christian v. Tennessee Petroleum Underground

Storage Tank Bd

, 928 S.W.2d 927 (Tenn. App. 1996) ( Christian II ). The trial court granted the motion and set another hearing. Upon recon sidera tion, the trial court noted that while the facts in the Christian decisions

were distinguishable fr

om those in this case , the Court in Christian nevertheless co nsidered the same rules at issue in the case at bar. The trial court found that it was bound by the rulings in Christian and reversed its

earlier decision. Thus, the trial court affirmed the Board’s decision to deny Stone4

Fort eligibility for F

und reimbursemen

t. From this order, St

one Fort now appea

ls. On appeal, Stone Fort

contends the tria

l cou rt was correct in its first ruling that the Board exceeded its statutory author

ity in promulgating r

ules limiting fund el

igibility to pr operty owners wh o timely registered and paid the annual fees. Stone Fort asserts that the trial court erroneou sl y

r elied on Chr istian I and Christian II in its subsequent affirmance of the Board’s denial of Fund reimbursement

to Stone Fort. In the alternativ e, Stone Fort asser

ts that it complied wi

th all requirements, and that the Board had waived application of the site check requirement. We review the Board’s decision pursuant to the sam

e statute that governed the trial court’s decision, Tennessee Code Annotated § 4-5-322(h), which provides that we may “reverse or modify” the Board’s deci

sion if it prejudice

s the rights of the p

etitioner becau

se it is: (1) In violation of

constitutional or st

atutory provisions ; (2) In excess of the statutory authority of the agency; (3) Made upon unlawful procedure; (4) Arbit rary or capricious or characterized by abuse of discretion or clear l y unwarranted exercise of discretion; or (5) Unsupported by evidence which is both substantial and material in the light of the entire record. See Tenn. Code Ann. § 4-5-322(h) (1996). Stone Fort contends the Bo ard exceeded i

ts statutory authority in promulgating rules which requir e the reg istration of the USTs and the payment of fees annually and thereby limiting Fund eligibility. Stone For t ar gues that the statute fails to include a temporal limitation, and thus any requirement

created by the Board in limiting Fund eligibility ex ceeds it s statutory authority. The Board argues that Stone Fort ignores other provisions in the statute, and those provisions,

in addition to Christian I and Christian II , allow the Board to promulgate rules limiting Fund eligibility. Tennessee Code Annotated § 68 -215-107(f) ad

dresses t he authority of the Board to promulgate

rules implementing

the Act. § 68-215-107(f)

states in part: “Th

e board may promu

lgate and adopt such rules and regulations in accordanc e with the provisions of the Uniform A dminis trative Procedures Act, complied in title 4, c

hapter 5, as are

required elsew

here in this chapter or are otherwise

necessary or de

sirable to implement th

e provisions of this chapter . . . .” Tenn. Code Ann. § 68-215-107(f) (1996). This Court

addressed the Boa

rd’s authority to p

romulgate rules and regulations implementin g the Tennessee Pet

roleum Und erground Storage Tank Act in Christian v. Tennessee Petroleum Undergro und

Ta nk Board , 1995 WL 241331 (Tenn. App. April 26, 1995) ( Christian I ). In5

Christian I , Christian, the owner of proper ly registered USTs, failed to timely pay annual registration fees for

the time period July 1, 1990, through June 30, 1991. Id. After the Division sent two notices requesting payment and informing Christian of the consequen ces resulting in un

timely payment, the Division, on April 26, 1991, notified Christian that the USTs were deemed ine ligible pursuant to

untimely payment of fees. Id. The notice required Christian to pay “all past due fees and late penalties and have soil samples analyzed for contamination” in order to “reestablish” fund eligibility. Id. By May 30, 1991, Christian paid the outstanding registration fees and penalties. Id. Subsequently, Christian filed a petition with the Board contending that the Board’s decision to revoke fund eligibility was ar b itrary and capricious. Id. at *2. The sole issue on appeal was whether Christian lost fund eligibility pursuant to untimely payment of annual registration fees as required under Tennessee Code Annotat ed § 68-215 -109 and the Board’s rules and regulations promulgated under the statute. Id. Christian I did not address the Site Check Policy. In Christian I , the Court discussed the Act and the Board’s authority to promulgate rules and regulations pursu

ant to the Act: The Tennessee Petroleum Underground Storage Tank Act (Act) grants the Board authority to promulgate, in a

ccordance with

the Uniform

Administrative Procedures Act, those rules and reg ulations pertaining to the “[r]equirements for maintaining evidence of financial responsibility for taking corrective a ction and compensating third parties for bodily injur y a nd property damage caused by sudden and non-sudden accidental releases arising from operation of a petroleum [UST]” and “the mechanism

by which the fund ma

y provid e relief” if and when such events occur. The fund is available “to assist with the financi al responsibility requirements for owners and/or operator

s of petroleum [UST

s] , including cleanup of contamination

. . . .” To qualify for fund

assistance, the owner

and/or operator must have paid “the required [UST] fee.” The Board is authorized to promulgate those rules necessary for the “as sessm ent and collection” of these fees, including their amounts and the dates when due. Christian , 1995 WL 241331, at *2 (citations omitted). The Court noted that the Board’s rules required “substantial compliance” in order t o be Fu nd eligible, and that “substantial compliance” included the “time

ly payment of all annual tank fees . . . .” Id. at 4. The rules set forth procedures for notifying the owner of impending Fund ineligibility. Id. The Court noted that the Christian’s actions were in

“direct contravention” of the Board’s rules for Fund eligibility. Id. at 6. The Court concluded

that the Board’s de

nial o f Fund eli gibility to Christian was “neither arbitrary nor capricious” and was “supported by the evidence.” Id. In Christian II , the same

parties were before the Court. Christian v. Tennessee Petrole um Underground

Storage Tank Board

, 928 S.W.2d 927 (Te

nn. App. 1996). As s

et forth above, on6

April26, 1991, the Division notified Christian that the USTs were fund ineligible. Christian , 1995 WL 241331, at *1. In order t o reestablish fund eligibility, the Divi

sion also directe

d Christian to perform a site check demonstrating that the site had not been contaminated. Christian , 928 S.W.2d at 928. On or about September 9, 1991, the Division notified Christian of a December 22, 1991, deadline of requiring o wner s to implement a method for leak detection. Id. Christian failed to respond. Id. On approxim ately Febr uary 27, 1992, the Division received a complaint of a potential contamination near the location of Christian’s USTs. Id. Subsequently, the Division performed soil sample tests at the location and found contamination. Id. at 929. The Division informed Christian of the necessary req

uirements as a re

sult of a “confir

med release

of petroleum.” Id. Christian sent the Division an “Initial Site Characterization Report.” Id. However, the report did not contain the results of a site check which was required under the Rules. Id. Christian contended that the Board exceeded its authority in implementing a policy requiring

a site check for those owners who were re-establishing Fund eligibility by paying overdue fees. Id. at 928. Christian received notification that the USTs were fund ineligible, and tha

t a site check was requi red in ord er to regain Fund eligibility. Id. Christian challen ged the Board’s a

uthority in adopting the Site Check Policy. Id. The Court in Christian II cited Program Rule 1200-1-15-.09(5)(c): An owner or operator that has been issued a Notice of Fund Ineligibility must resolve the non-com plianc e to the satisfaction of the Division for Fund eligibility to be restored . . . It is the responsibility of the owner or operator to provide evidence of co mplian ce to the Division. The Fund will not cover either investigative or corrective action costs or third party liability claim

s associated with

a release which occurred during th

e time of Fund inelig

ibility . (emphasis in original). Id. at 930. The Court found that the Board was within i ts authority to requi re a site check t

o determine whether a release had occurred during the period of Fund ineligibility: The rule clearly

prohibits the application of fund monies for co

rrective action

costs due to a release occurring during the time of fund ineligibility. Withou t the site check requirement,

how else could “a release which occurred during the time of fund ineligibility” be discovered? Further, we do not find the record to suggest that the Board has inconsis

tently or arbitra

rily imposed such r

equirement. Id. at 930-31. As the trial court con cluded upon reconsideration, we fi nd the Christian decisions controlling in this case. Most of the arguments proffered by Stone Fort in this case were considered and rejected7

by this court in the Christian decisions. Stone Fort argues that Christian I is distinguishable case because Christian, the owner of the UST, failed to maintain

Fund eligibility

by the untimely

payment of the annual fees, whereas Stone Fort never established initial eligibility because the USTs were not initially registered. However, Program Rule 1200-1-15-.09(5)(a) states in par t: “If at t he time of discovery of a release, the Division determines that an owner and/or operat or has failed to esta

blish Fund eligibility i

n accordance

with subparagraph (4)(a), corrective action costs and/o

r third party

damages associated withthat release are not eligible for coverage by the Fund.” Tenn. Comp. R. & Regs. tit. 14, ch. 3 12 00-1-15-.09(5) (1998). Program Rule (4)(a) requires both registration of the tank and paymen t of annual fees in order to acquire and retain fund eligibility. Tenn. Comp. R. & Regs. tit. 14, ch. 3 1200-1-15-.09 (4)(a) (1998). In this case, Stone Fort failed to register the USTs and pay the fees within the period of time set out by the Board. Stone Fort also argues th

at Christian II

is distinguishable because Christian received notice of the Site Check Policy contemporaneous with the payment of the overdue fees. In this case, Stone Fort received no notic

e of the Site Check

Policy until it r

equeste d reimbursement from the Fund, fifteen months after late registration and payment of overd

ue fees. The Boa

rd notes Stone Fort c

ould not have established eligibility for these USTs because they failed to timely register and pay fees as required by Program Rule 1200-1-15-.09 (4)(a). In 1992, the site check requirement was an internal policy; in 1995 the Board’s Rules were amended to include the Site Check Policy. In 1992, since Stone Fort had failed to timely register and pay fees as required by the Rules, Stone Fort cou

ld not establish eligibility for the two USTs on the Property. Stone Fort asserts a violation of due process for the failure of the Board to give Stone Fort notice of the Site Check Policy. Stone Fort must assert some prejudice on its behalf in the Board’s failure to notify them of the Site Check Policy. See Davis v. Barr , 646 S.W.2d 914 (Tenn. 1983); Childs v. Roane County Bd. of Educ. , 929 S.W.2d 364 (Tenn. App. 1996). There has been no showing in this case that, had the soil sample test been perform ed at the time Stone For t says it should have been notifie

d, the results would

have shown no cont

amination as of th

at date. Therefore, Stone Fort failed to submit evi dence demonstra

ting that th e lack of notification by the Board prejudiced Stone Fort. Therefore, the trial court’s affirmance of the Board’s denial of Fund eligibility is affirmed.8

The decision of the trial court is affirmed. Costs are assessed against Appellant, for which execution may issue if necessary.

HOLLY KIRBY LILLARD, J. CONCUR:

W. FRANK CRAW

FORD, P. J., W.

S.

DAVID R. FARMER, J.