Oregon Administrative Rules › Chapter 340 - DEPARTMENT OF ENVIRONMENTAL QUALITY › Division 122 - HAZARDOUS SUBSTANCE REMEDIAL ACTION RULES › Section 340-122-0120 - Security Interest Exemption

Current through Register Vol. 63, No. 7, July 1, 2024
(1)
			 Pre-foreclosure. A person or "holder" who maintains indicia of ownership
			 primarily to protect a security interest in a facility, and who does not
			 participate in the management of the facility, is not an "owner or operator" of
			 such facility under ORS 465.255(1)(a) and (b). Whether a transaction falls
			 within this exemption will depend on the facts and on the law otherwise
			 applicable to the transaction:
(a) "Holder"
			 for the purposes of ORS 465.200 et seq. and this rule means a person who
			 maintains indicia of ownership (as defined below) primarily to protect a
			 security interest (as defined below). A holder includes the initial holder
			 (such as a loan originator), any subsequent holder (such as a
			 successor-in-interest or subsequent purchaser of the security interest on the
			 secondary market), a guarantor of an obligation, a surety, or any other person
			 who holds ownership indicia primarily to protect a security interest, or a
			 receiver or other person who acts on behalf or for the benefit of a
			 holder;
(b) "Indicia of Ownership"
			 as used in ORS 465.200 et seq. and this rule means evidence of a security
			 interest, evidence of an interest in a security interest, or evidence of an
			 interest in real or personal property securing a loan or other obligation,
			 including any legal or equitable title to real or personal property acquired
			 incident to foreclosure or its equivalents. Evidence of such interests include,
			 but are not limited to, mortgages, deeds of trust, liens, judgment liens,
			 statutory liens, surety bonds and guarantees of obligations, title held
			 pursuant to a lease financing transaction in which the lessor does not select
			 initially the leased property (hereinafter "lease financing transaction"),
			 legal or equitable title obtained pursuant to foreclosure, and their
			 equivalents. Evidence of such interests also include, but are not limited to,
			 assignments, pledges, or other rights to or other forms of encumbrance against
			 property that are held primarily to protect a security interest. A person is
			 not required to hold title or a security interest in order to maintain indicia
			 of ownership;
(c) "Primarily to
			 Protect a Security Interest" as used in ORS 465.200 et seq. and this rule means
			 that the holder's indicia of ownership are held primarily for the purpose of
			 securing payment or performance of an obligation. The term "primarily to
			 protect a security interest" does not include indicia of ownership held
			 primarily for investment purposes, nor ownership indicia held primarily for
			 purposes other than as protection for a security interest;
(d) "Security Interest" as used in ORS
			 465.200 et seq. and this rule means an interest in a facility created or
			 established for the purpose of securing a loan or other obligation. Security
			 interests include, but are not limited to, mortgages, deeds of trusts, liens,
			 judgment liens, statutory liens, and title pursuant to lease financing
			 transactions. Security interests may also arise from transactions such as sale
			 and leasebacks, conditional sales, installment sales, trust receipt
			 transactions, assignments, factoring agreements, accounts receivable financing
			 arrangements, and consignments, if the transaction creates or establishes an
			 interest in a facility for the purpose of securing a loan or other
			 obligation;
(e) "Participating in
			 the Management of a Facility" as used in ORS 465.200 et seq. and this rule
			 means that the holder is engaging or has engaged in acts of facility
			 management, as defined herein:
(A) Actions
			 that Are Participation in Management. Participation in the management of a
			 facility means actual participation in the management or operational affairs of
			 the facility by the holder, and does not include the mere capacity to
			 influence, or ability to influence, or the unexercised right to control
			 facility operations. Whether the holder has participated in management
			 sufficiently to void the exemption is a fact-sensitive inquiry. In all cases,
			 the determination of whether a holder is participating in management depends on
			 the holder's actions with respect to the facility rather than the outcomes
			 associated with such actions. A holder is participating in management, while
			 the borrower is still in possession of the facility encumbered by the security
			 interest, only if the holder either:
(i)
			 Exercises decision-making control over the borrower's environmental compliance,
			 such that the holder has undertaken responsibility for the borrower's hazardous
			 substance handling or disposal practices; or
(ii) Exercises control at a level comparable
			 to that of a manager of the borrower's enterprise, such that the holder has
			 assumed or manifested responsibility for the overall management of the
			 enterprise encompassing the day-to-day operational (as opposed to financial or
			 administrative) decision-making of the enterprise. Operational aspects of the
			 enterprise include, but are not limited to, functions typically performed by
			 positions such as that of facility or plant manager, operations manager, chief
			 operating officer, or chief executive officer. Financial or administrative
			 aspects include, but are not limited to, functions typically performed by
			 positions such as that of credit manager, accounts payable/receivable manager,
			 personnel manager, controller, or chief financial officer.
(B) Actions That are not Participation in
			 Management:
(i) Actions at the Inception of
			 the Loan or Other Transaction. No act or omission prior to the time that
			 indicia of ownership are held primarily to protect a security interest
			 constitutes evidence of participation in management. A prospective holder who
			 undertakes or requires an environmental inspection of the facility in which
			 indicia of ownership is to be held, or requires a prospective borrower to clean
			 up a facility or to comply or come into compliance (whether prior or subsequent
			 to the time that indicia of ownership are held primarily to protect a security
			 interest) with any applicable law or regulation, is not by such action
			 considered to be participating in the facility's management. Neither the
			 statute nor this rule requires a holder to conduct or require an inspection to
			 qualify for the exemption, and the liability of a holder cannot be based on or
			 affected by the holder not conducting or requiring an inspection.
NOTE:
A person who desires to preserve or claim a
				defense under ORS 465.255(2)(a) must undertake the appropriate inquiry
				described in ORS 465.255(6).
(ii) Policing the Security Interest or Loan.
			 A holder who engages in policing activities prior to foreclosure or its
			 equivalents will remain within the exemption provided that the holder does not
			 by such actions participate in the management of the facility. Such policing
			 actions include, but are not limited to, requiring the borrower to clean up the
			 facility during the term of the security interest; requiring the borrower to
			 comply or come into compliance with applicable federal, state, and local
			 environmental and other laws, rules, and regulations during the term of the
			 security interest; securing or exercising authority to monitor or inspect the
			 facility (including on-site inspections) in which indicia of ownership are
			 maintained, or the borrower's business or financial condition during the term
			 of the security interest; or taking other actions to adequately police the loan
			 or security interest (such as requiring a borrower to comply with any
			 warranties, covenants, conditions, representations, or promises from the
			 borrower);
(iii) Work Out. A holder
			 who engages in work out activities prior to foreclosure or its equivalent will
			 remain within the exemption provided that the holder does not by such action
			 participate in the management of the facility. For purposes of this rule, "work
			 out" refers to those actions by which a holder, at any time prior to
			 foreclosure or its equivalents, seeks to prevent, cure, or mitigate a default
			 by the borrower or obligor; or to preserve, or prevent the diminution of, the
			 value of the security. Work out activities include, but are not limited to,
			 restructuring or renegotiating the terms of the security interest; requiring
			 payment of additional rent or interest; exercising forbearance; requiring or
			 exercising rights pursuant to an assignment of accounts or other amounts owing
			 to an obligor; requiring or exercising rights pursuant to an escrow agreement
			 pertaining to amounts owing to an obligor; providing specific or general
			 financial or other advice, suggestions, counseling, or guidance relating to
			 work out activities; and exercising any right or remedy the holder is entitled
			 to by law or under any warranties, convenants, conditions, representations, or
			 promises from the borrower;
(iv)
			 Actions Taken Under ORS 465.255(7)(a). A holder does not participate in the
			 management of a facility merely by taking a response action in accordance with
			 ORS 465.255(7)(a).